The SEC has filed Texas securities fraud charges against Daniel Bergin, a Dallas-based Cushing MLP Asset Management LP senior equity trader. Bergin is accused of front running, insider trading, and failing to notify his employer of certain trades.
According to the regulator, Bergin, who was a primary equity trader at the Swank Capital-owned registered investment advisory firm), allegedly made at least $1.7 million in profits in trading securities before making large orders of the same securities for Cushing customers. He purportedly used accounts that were registered in the name of Jacqueline Zaun, his wife, to make the personal trades. The Commission has named her as a relief defendant.
SEC Enforcement Division’s Asset Management Unit Marshall S. Sprung says that Bergin breached clients’ trust by secretly using data about their trades to garner an unfair advantage for himself and make massive profits. (As a Cushing, employee, Bergin had access to information about the trades (and their timing) that the RIA made for clients.
Per the agency’s complaint, over $520,000 of Bergin’s profits was made through Zaun’s accounts involving 132 instances of front running client orders. Bergin also allegedly used privileged information to trade securities in his wife’s accounts at least 400 times.
The SEC has obtained a court order to freeze the assets of Bergin and Zaun. It wants disgorgement of “illicit trading profits, fines, and interest. It is also pursuing a permanent injunction against Bergin. The Commission’s complaint is alleging Securities Exchange Act of 1934 and Rule 10b-5 violations and the Investment Company Act of 1940 and Rule 17j-1 violation.
Meantime, Swank Capital has fired Bergin, noting that it has a zero tolerance policy for illegal trades. Also, per internal policy, its employees are not allowed to engage in personal securities trading within seven days of a client’s trades.
Front running is illegal. It is the term given to when a trader takes a position in an equity before an action that his/her financial firm will take. This can move the equity’s price in a predictable manner. Another term for front running is forward trading.
Traders that engage in front running usually have insider information about their firms’ trades. Front running is often done to personally benefit the trader.
At Shepherd Smith Edwards & Kantas, LTD, LLP, our Dallas securities lawyers know that choosing who will help you invest your money is an important decision. When that trust is breached and your money is negligently mishandled and you find yourself suffering investment losses rather than gains, it is time to contact an experienced front running fraud law firm to explore your legal options. Even if you are resolving your claim via FINRA arbitration, you cannot go wrong by working with an experienced securities arbitration lawyer.
Read the Complaint (PDF)
Stock trader at RIA charged with front running, Investment News, May 24, 2013
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Two Men Sentenced in Texas Securities Case Involving $30 Million Promissory Note Fraud that Bilked Investors Via Ponzi Scam, Stockbroker Fraud Blog, May 14, 2013
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