Settlement Concluded with Broker in Case Alleging Public Offering Allocation Fraudulent Practices

Litigation Release No. 24404 / February 15, 2019

Securities and Exchange Commission v. Brian Hirsch et al., No. 17-cv-13226  (D.N.J.)

On February 13, 2019, the U.S. District Court for the District of New Jersey entered a final judgment against defendant Brian Hirsch, who was charged by the SEC in connection with public offering allocation practices at two large brokerage firms.

The SEC's complaint, filed in December 2017, alleges that, while employed on the wealth syndicate desk of two different brokerage firms, Hirsch entered into undisclosed arrangements with certain customers in violation of the firms' initial and other public offering allocation policies and procedures. Under the arrangements, Hirsch provided the customers with preferential access to, and larger allocations of, public offerings marketed by the firms. In return, these customers made cash payments to Hirsch of up to 25 percent of the profits made by selling the offering stock into the secondary market. Hirsch previously pled guilty to criminal charges filed in a parallel action by the U.S. Attorney's Office for the District of New Jersey. The SEC also charged two of Hirsch's customers who entered into the arrangements (see here and here), both of whom have entered into partial settlements with the SEC.

Hirsch consented to the entry of the judgment, which enjoins him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and imposes a total of $783,600 in disgorgement plus prejudgment interest. The judgment provides that the disgorgement is deemed satisfied by $800,000 in forfeiture that was ordered against Hirsch in the criminal proceeding. The SEC has also issued an administrative order barring Hirsch from any association with any broker-dealer, investment advisor, or other securities industry participants.

The SEC is represented by David Austin, Chevon Walker, Todd Brody and George Stepaniuk, and the case is being supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the United States Attorney's Office for the District of New Jersey and the Federal Bureau of Investigation in this matter.