Brian Colin Doherty of New York New York a stockbroker formerly employed by BGC Securities has been charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that Doherty engaged in a fraudulent investment scheme. Department of Enforcement v. Brian Colin Doherty Disciplinary Proceeding No. 20150470058-01 (Aug. 2, 2018).
According to the Complaint, between April and June of 2015, TS traded on the credit trading desk of another broker-dealer, SUI, where TS managed a proprietary trading book. While Doherty was associated with BGC, he reportedly handled the trades for the SUI account managed by TS. Throughout that timeframe, the Complaint stated that BGC mandated within its written supervisory procedures that prearranged trades, which included an offer to sell combined with an offer to buy back at the same price or a higher price, had been prohibited.
The Complaint stated that in April of 2015, TS met with Doherty, and informed him that TS’s trading book was detrimentally affected when inventory had been held in excess of six months. Apparently, TS sought to sell and rebuy aged positions in TS’s trading book to avoid penalties being imposed by SUI. TS apparently intended on selling and rebuying aged positions for exactly the same price, where SUI would compensate BGC for the transactions. The Complaint alleged that TS informed Doherty that he would use a code word, Melissa, to indicate to Doherty that TS desired for a prearranged trade to be effected.
The Complaint alleged that Doherty was cognizant that losses would be sustained by SUI on the prearranged trades, and that Doherty’s participation in TS’s scheme would require securities positions to be taken by BGC that ran afoul of its practices or policies. Doherty purportedly met with BGC supervisor, JE, as well as two additional compliance individuals, MS and SD, where he attempted to obscure the purpose of the trading activities that had been discussed between Doherty and TS.
The Complaint stated that Doherty, inter alia, never informed MS, SD or JE that: securities positions would be taken by BGC that ran afoul of its business model; TS’ proposed trading activities were designed to enable TS to increase his compensation through bypassing SUI’s inventory policy; that TS and Doherty intended on executing the transactions on both sides at prices that were prearranged; and transactions would be triggered through a code word.
The Complaint stated that Doherty ultimately participated in the scheme proposed by TS. Apparently, in one case, at 11:12 a.m. on March 14, 2015, CBS 5.5% had been sold by TS to Doherty at 106.487, totaling $305,617.67. Then, on 2:28 p.m., the same amount of CBS 5.5% had been purchased by TS at 106.612, totaling $305,976.44. The Complaint alleged that SUI sustained a loss on the transaction.
The Complaint alleged that at least eighteen more same-day transactions involving counterbalancing purchases and sales of bonds had been executed by Doherty and TS. The transactions, according to FINRA, involved fifteen occasions where code word Melissa was referenced to prompt the prearranged trades. Ultimately, according to the Complaint, the securities positions were maintained by TS but with their holdings dates having been updated in a manner enabled TS to bypass SUI’s inventory policy. Apparently, SUI sustained an estimated $55,773.00 loss because of the prearranged trading.
Moreover, Doherty was reportedly paid a percentage of revenue BGC generated as a result of the prearranged transactions. FINRA Department of Enforcement alleged that Doherty’s conduct was violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and FINRA Rules 2020 and 2010.
FINRA Public Disclosure confirms that on August 17, 2015, Doherty was discharged by BGC based upon allegations that he took part in the prearranged trading scheme. Since September 8, 2017, Doherty has been registered with Whitaker Securities LLC.
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