SEC Pursues Order Processing Clerk for Making Unauthorized Hedge Fund Trades
The SEC charged an order processing clerk with violations of the securities laws in connection with placing and concealing unauthorized trades for hedge funds managed by his employer. The clerk did not have authority to place the trades, which cost the funds over $8 Million, and was not a registered representative or an investment adviser representative. It appears that the scheme occurred within a 3-month period when the respondent assumed the responsibilities of a retiring employee who had been responsible for reviewing trade reports. As a result, the respondent was in a position to make the trades and hide his trading activities. The respondent was charged with direct violations of Section 10(b) and Rule 10b-5 as well as aiding and abetting violations of Section 206(2) and 204 of the Advisers Act. He was fined $50,000 and barred from the industry. The firm was also charged with failure to supervise.
OUR TAKE: The point of this case is to remind firms to institute checks and balances on employee activity. One of the oddest aspects of this particular case is that the SEC did not allege any particular motive or personal benefit.