SEC Accuses Broker of Giving Some Customers Preferential IPO Access in Exchange for Over $1M in Kickbacks

The SEC has filed a case accusing broker Brian Hirsch of illegally receiving over $1M in secret kickbacks in return for giving some customers favored access to “lucrative” initial public offerings. The regulators said that these customers made money because of the special treatment. Meantime, prosecutors in New Jersey have filed a parallel criminal case against Hirsch.

According to the SEC, Hirsch, who worked at two broker-dealers, disregarded policies and procedures and made “long-running” deals with specific customers, granted them bigger allocations of some of the public offerings that the firms were marketing. Advisor Hub reports that these two brokerage firms were Barclays Capital (BARC) and Stifel (SF).

As part of the deal, contends the regulator, a customer named Joseph Spera and another customer paid Hirsch cash kickbacks that were equivalent to a percentage of the trading profits they made for the offering stock allocated to them. Hirsch is accused of giving the two customers “preferential access to hundreds of IPOS and secondary public offerings.” These customers purportedly would usually sell their stock quickly so that they could make a “substantial profit.” This was at the expense of the firms’ other customers and the interests of issuers in raising funds from long-term investors.

Spera, who is an ex-day trader is also facing SEC charges. He allegedly made about $4M in trading because of the preferential allocations. He is accused of paying Hirsh over $1M in kickbacks. Spera previously pleaded guilty to insider trading charges in a different case.

The other customer is accused of paying Hirsch more than $200K as part of their kickback deal. The SEC did not name other customers that may have received the same preferential allocations. The regulator said that Hirsch breached his contractual obligations when he did not disclose to both brokerage firms that he had set up arrangements with the two customers or that he received kickbacks from them.

If you are an investor who suspects that your losses may be a result of broker fraud, contact our stockbroker fraud law firm today. Shepherd Smith Edwards and Kantas, LTD LLP has been helping investors to recoup their money since 1990.

Read the SEC Complaint (PDF)

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