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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22671 / April 15, 2013

Securities and Exchange Commission v. David Miller, Civil Action No. 3:13-cv-00522

SEC Charges Former Rochdale Securities Broker for Rogue Trades

The Securities and Exchange Commission announced today that it filed a partially settled civil injunctive action in federal court in Connecticut against David Miller, a resident of Rockville Centre, New York, who formerly worked as an institutional sales trader at Rochdale Securities LLC, a Connecticut-based brokerage firm. The action alleges that Miller, alone or in concert with others, concocted a scheme to personally profit from placing a series of unauthorized orders to buy a total of more than 1.6 million shares of Apple, Inc. stock on October 25, 2012.

According to the Commission's complaint, after receiving a customer order to purchase 1,625 shares of Apple stock as part of the fraudulent scheme, Miller instead entered a series of orders to purchase a total of 1,625,000 shares of Apple (at a cost of almost $1 billion) on October 25, 2012. Miller planned to share in the customer's profit from selling the 1,625,000 shares if Apple's stock price increased following Apple's expected earnings announcement later that day. Alternatively, if Apple's stock price decreased, Miller planned to claim that he inadvertently misinterpreted the size of the customer's order, and planned for Rochdale to take responsibility for the unauthorized purchase and suffer the losses. Miller misrepresented to Rochdale and its principals and employees that one of Rochdale's customers had authorized the Apple orders and assumed the risk of loss on any resulting trades. Apple's stock price decreased after Apple's earnings release was issued on October 25, the customer denied buying all but 1,625 Apple shares, and, as Miller planned, Rochdale took responsibility for the unauthorized purchase. Rochdale then sold the Apple stock at an approximately $5.3 million loss, causing the value of Rochdale's available liquid assets to fall below limits required by SEC rules applicable to broker-dealers. Rochdale effectively ceased operations shortly thereafter.

The Commission's complaint charges Miller with violations of Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and seeks a permanent injunction and a civil monetary penalty.

The Commission's complaint charges Miller with violations of Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and seeks a permanent injunction and a civil monetary penalty.

To settle the Commission's charges in the injunctive action and related administrative proceedings that the Commission will separately institute, Miller has consented to be barred from any future association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and to be barred from participating in any offering of penny stock. Miller also has consented, subject to court approval, to be enjoined from future violations of the antifraud provisions of the federal securities laws. The amount of any civil monetary penalty will be determined at a later date by the court upon the SEC's motion.

In a parallel criminal proceeding, Miller pleaded guilty to one count of conspiracy to commit securities and wire fraud and one count of wire fraud. He will be sentenced at a later date.

The SEC's investigation, which is continuing, was conducted by Eric A. Forni, David H. London, and Michele T. Perillo of the SEC's Market Abuse Unit in the Boston Regional Office. The SEC acknowledges the assistance of the United States Attorney's Office for the District of Connecticut, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2013/lr22671.htm


Modified: 04/15/2013