Compliance Solutions for Investment Advisers

SEC Charges Adviser with Front Running

The SEC has charged a Dallas-based registered investment adviser’s primary equity trader with insider trading and trading ahead of large block trades for the adviser’s clients through one of his wife’s brokerage accounts. The trader failed to report his wife’s accounts and one of his accounts, and holdings and transactions in these accounts to the investment adviser, avoiding preclearance of trades in these accounts, and tried to hide these accounts from SEC examiners, who referred the matter to the SEC’s Division of Enforcement’s Asset Management Unit for investigation. The Director of the SEC’s Fort Worth Regional Office noted that the trader’s actions were “particularly egregious” because the firm had given him primary responsibility for managing price exposures for client equity trades. The trader had access to material, nonpublic information about these trades that his employer planned to make for clients, and determined the timing of execution and the size of each order.

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