Last week, FINRA barred Kenneth Ronald Allen from the securities industry. Allen, who was once an equity trader at First New York Securities L.L.C., was found to be trading Japanese securities because of non-publicized, material information acquired from a corporate insider.
According to an investigation by FINRA, the Office of Fraud Detection and Market Intelligence, and the Department of Enforcement, Allen placed orders using a firm proprietary trading account from New York City to short sell shares of Tokyo Electric Power Company Inc. (TEPCO), a company listed on the Tokyo Stock Exchange, in September 2011. Having inside information that TEPCO was about to announce a secondary public offering of its securities, Allen generated a short position in TEPCO shares. Allen obtained the information from a consultant, who in turn obtained it from an employee at Nomura Securities Co. Ltd., a sizable Japanese broker-dealer out of Tokyo that underwrote the TEPCO offering.
Between September 15, 2010 and September 28, 2010, Allen traded in TEPCO shares having previously received the inside information. On September 29, 2010 TEPCO made a public announcement regarding the secondary offering. Subsequently, the market price for its shares fell. Having covered the short position following the announcement, Allen received a profit of about $206,000.
According to FINRA, Allen violated its Rules to observe high standards of commercial honor and just and equitable principles of trade. Cameron K. Funkhouser, Executive Vice President of FINRA’s Office of Fraud Detection and Market Intelligence, stated that “[i]ndividuals who are registered with FINRA are expected to observe high ethical standards and conduct themselves in accordance with just and equitable principles of trade regardless of where securities are listed.”
Allen consented to the entry of FINRA’s findings while neither admitting nor denying the charges.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.