The Securities and Exchange Commission announced fraud charges and an immediate asset freeze against a trader at a Dallas-area investment advisory firm who illegally profited by placing personal trades before executing large order trades for clients that had a strong opportunity to increase the stock’s price. 

 

The Securities and Exchange Commission alleges that Mr. Daniel Bergin, a senior equity trader at Cushing Asset Management, secretly processed hundreds of trades through his wide’s accounts in an illegal maneuver known as front running. Mr. Bergin illegally profited by at least $500,000 by purchasing securities in his wife’s accounts the same day he placed large orders for the same stocks on behalf of his firm’s clients. Bergin hid his illicit trading activities by failing to disclose his wife’s accounts to the company and avoiding pre-clearance of his trades in said accounts. Bergin also attempted to conceal his wife’s accounts from SEC investigators. 

 

According to the complaint filed yesterday in federal court, several investment advisers employ traders to manage their exposure to price risks and place these significant client orders in advantageous market centers with substantial trading quantities that minimize unfavorable price fluctuations against client interests. Bergin is the individual primarily responsible for managing price exposures regarding client orders for equity transactions. 

 

“Bergin’s misconduct is particularly troublesome because his firm relied on him to manage risk and market exposure for its investments; instead, Mr. Bergin pitted his clients’ monetary interests against his own,” said David Woodcock, the Director of the SEC’s Fort Worth Office. 

 

According to the complaint, Mr. Bergin procured at least $1.7 million in profits through his wife’s accounts from 2011 to 2012l more than $520,000 of the $1.7 million represents profits from roughly 132 trades in which Bergin placed his initial trades in his wife’s accounts ahead of his client’s transactions. 

 

According to the complaint, roughly $1.8 million was withdrawn since July of 2012 from Bergin’s wife’s trading account; the bulk of withdrawals were substantial transfers to her bank account. 

 

In order to stop Bergin’s illegal activity, the SEC requested—which was fulfilled by a United States District Court Judge—an emergency court order to freeze the assets illegally held by Bergin. 

 

 

Source: SEC.gov