James Stewart Meagher, of New York, New York, a stockbroker formerly employed with Chardan Capital Markets, LLC, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity according to an Office of Hearing Officers Default Decision containing findings that Meagher engaged in manipulative and fraudulent trading, misappropriated funds of customers, and falsely testified to FINRA in regard to his activities. Department of Market Regulation v. James Stewart Meagher, Disciplinary Proceeding No. 20110305098-02 (Jan. 16, 2018).
According to the Decision, in November of 2011, Meagher started his market manipulation scheme, where he attempted to affect closing prices of securities through placing sale or purchase orders for securities at or around the time that the securities markets closed. Apparently, his scheme affected the stock prices of Source Gold Corp., Toron, Inc., Virtual Medial Centre, Inc., and Omega Navigation Enterprises, Inc. Apparently, eleven purchases were effected in each of the securities on the last day in the month in which trades could be placed. Prior to the market closing, Meagher would buy the stocks at a higher price than prior trades had been effected for, paying prices which exceeded the best available offer prices. The Decision stated in the course of effecting those transactions, he was warned by Chardan Capital Markets LLC’s electronic systems about paying a price which was not the most favorable; however, he ignored the warnings.
The Decision stated that Meagher’s stock purchases determined the closing prices for those securities, where the Chardan Capital Markets LLC utilized those stock prices for valuing securities in the investment accounts that he managed. Apparently, changes in the securities’ market values affected the compensation that Meagher earned. Prior to Meagher’s scheme, the affected securities had incurred trading losses, which detrimentally affected his compensation; he was not compensated between September of 2011 and November of 2011 because of those losses. His scheme was evidently geared for him to generate additional compensation and make up for those prior losses. FINRA found Meagher’s manipulative and fraudulent conduct to be violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, as well as FINRA Rules 2010 and 2020.
The Decision also revealed that Meagher concocted a fraudulent scheme to misappropriate the funds of an investor after Meagher’s registration with Chardan Capital Markets LLC was terminated in May of 2012. Particularly, Meagher solicited investor JA to buy Facebook shares via an initial public offering. Apparently, $25,080.00 had been wired by the investor to Meagher to buy the Facebook shares at $38.00 a share. Evidently, Meagher utilized his own funds along with JA’s funds to buy 1,750 Facebook shares, but kept $3,080.00 of JA’s funds in the process. Meagher then reportedly sold JA’s Facebook shares that month at prices ranging from $30.00 per share to $32.53 per share; however, he never informed JA about the transactions.
The Decision stated that the proceeds from JA’s Facebook stock sales had been placed in Meagher’s banking account and utilized to pay Meagher’s personal expenses. Subsequently, JA instructed Meagher in November of 2012 that JA wanted to sell his positions in Facebook and have the proceeds returned to him. Yet, on November 15, 2012, Meagher evidently informed JA that JA’s Facebook shares had been sold for a mere $21.00 per share, and that JA would receive $13,860.00. JA was apparently entitled to $17,115.00. However, JA only received $7,000.00 from Meagher. Evidently, Meagher pocketed the remaining $10,115.00 as well as $3,080.00 of JA’s funds which had never actually been invested by Meagher. FINRA concluded that Meagher diverted JA’s funds with the intent to keep JA’s funds for himself, failed to inform JA about the prior sale of Meagher’s Facebook positions, and misappropriated the majority of JA’s proceeds. Consequently, FINRA found Meagher’s conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, as well as FINRA Rules 2010 and 2020.
FINRA also found that Meagher failed to be forthcoming in FINRA’s investigation into his business activities. Specifically, on November 19, 2014, Meagher made false statements to FINRA staff in regard to his transactions relating to the Facebook initial public offering, claiming that JA loaned him funds rather than providing him money to invest and that JA’s loan had been repaid. FINRA found that Meagher’s false testimony in that regard was violative of FINRA Rules 2010 and 8210.
Since May 11, 1994, Meagher has been associated with eleven different broker dealers, four of which have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct.
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