Monday, April 15, 2013
The SEC charged David Miller, a former institutional sales trader at Rochdale Securities, a Connecticut-based brokerage firm, with scheming to personally profit from placing unauthorized orders to buy Apple stock. When the scheme backfired, it ultimately caused the firm to cease operations.
Miller agreed to a partial settlement of the SEC's charges and also pleaded guilty today in a parallel criminal case.
The SEC alleges that on Oct. 25, 2012, Miller misrepresented to Rochdale Securities LLC that a customer had authorized the Apple orders and assumed the risk of loss on any resulting trades. The customer order was to purchase just 1,625 shares of Apple stock, but Miller instead entered a series of orders totaling 1.625 million shares at a cost of almost $1 billion. Miller planned to share in the customer's profit if Apple's stock profited, and if the stock decreased he would claim that he erred on the size of the order. The stock wound up decreasing after an earnings announcement later that day, and Rochdale was forced to cease operations in the wake of covering the losses suffered from the rogue trades.
To settle the SEC's charges, Miller will be barred in separate SEC administrative proceedings from working in the securities industry or participating in any offering of penny stock. In the partial settlement in court, Miller agreed to be enjoined from future violations of the antifraud provisions of the federal securities laws. A financial penalty will be determined at a later date by the court upon the SEC's motion.
In the criminal proceeding, Miller pleaded guilty to charges of wire fraud and conspiracy to commit securities and wire fraud. He will be sentenced on July 8.