The SEC claims a senior equity trader at an RIA made big bucks front running client trades using an account owned by his wife. Andrew Osterland provides the details.
The Securities and Exchange Commission has filed charges against a senior equity trader at Cushing MLP Asset Management LP for allegedly front running client orders.
Daniel Bergin, a 40 year-old trader based in Dallas, allegedly made at least $1.7 million in profits trading securities before executing large orders of the same securities for clients of Cushing. The SEC says Mr. Bergin used accounts registered to his wife to conduct his personal trades.
Cushing Asset Management, a registered investment advisory firm owned by Swank Capital, specializes in investments in master limited partnerships and energy-related securities.
"Bergin betrayed the trust of his clients by secretly using information about their trades to gain an unfair trading advantage and reap massive profits for himself," Marshall S. Sprung, deputy chief of the SEC Enforcement Division's Asset Management Unit, said in an SEC release.
The complaint alleges that “more than $520,000” of $1.7 million in profits earned in Mr. Bergin's wife's accounts between 2011 and 2012 came from 132 specific instances of front running client orders. The regulator said that it also identified “at least 400” occasions in which Mr. Bergin used privileged information to trade securities in his wife's accounts. The SEC has named Mr. Bergin's wife, Jacqueline Zaun, as a relief defendant in order to recover allegedly illegal profits from her accounts.
As Cushing's primary equity trader, Mr. Bergin was privy to information about the timing and extent of trades the firm made on behalf of clients. According to the SEC complaint, Cushing had a policy that prohibited employees from personal trading in securities within seven days of a client's trades. It said Mr. Bergin failed to disclose the existence of his wife's accounts or of the trades he made within those accounts.
"Bergin's misconduct is particularly egregious because his firm depended on him to manage market exposure and risk for its investments. Instead, he pitted his clients' financial interests against his own," said David R. Woodcock, Director of the SEC's Fort Worth regional office, which conducted the investigation.
The SEC received a court order to freeze the assets of Mr. Bergin and Ms. Zaun. The agency is seeking disgorgement of “illicit trading profits,” interest and fines, as well as a permanent injunction against Mr. Bergin. Swank Capital has fired Mr. Bergin.
“As the SEC complaint makes clear, these illegal trades were actively concealed from the firm,” Swank Capital said in a statement provided by company spokesman Jonathan Morgan. “Consistent with our zero-tolerance policy related to such matters, we have taken swift and decisive action, and terminated the individual's employment.”
Mr. Bergin could not be reached for comment.
