Edward Manges, of Philadelphia, Pennsylvania, a municipal securities broker with Kildare Capital, Inc., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he engaged in a fraudulent trading scheme, and falsified statements to FINRA in the course of an investigation into his misconduct. Letter of Acceptance, Waiver and Consent, No. 20120317482-01 (June 6, 2016).
According to the AWC, from May 1, 2009 through June 30, 2011, FINRA reviewed Manges’ trading conduct to determine whether his round trip trading constituted a fraudulent scheme. Apparently, Manges effected a total of twenty-four planned round trip transactions with an inter-dealer broker involving municipal securities. In these round trip transactions, Manges reportedly would sell the inter-dealer broker the bonds, only to immediately repurchase the same bonds back at a higher price.
FINRA concluded that Manges conduct was fraudulent when considering that there was no supposed realistic change in ownership resulting from the round trip trades, and that such trades were executed in order to raise, in an artificial manner, the inter-dealer broker price in securities such that Manges would be able to garner a higher profit on the eventual sale of such securities to purchasers. FINRA noted that Manges’ intended on inducing customers and broker-dealers to buy the bonds at inflated prices.
FINRA noted that Manges raked in a profit of $208,630.00 in connection with ultimately selling the twenty-four bonds to broker-dealers and clients. FINRA found that Manges’ conduct was willful, and in violation of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, and MSRB Rule G-17.
The AWC stated that Manges claimed to FINRA, in the course of an investigation into his misconduct, that an inter-dealer broker had effected bid wanted auctions on Manges behalf, but such auctions did not prompt trades to result. Manges also reportedly claimed that his intentions with such round trip transactions were for purposes of providing nominal compensation to the broker for the broker’s work. FINRA found that Manges statements in this regard were not credible, and found him to be in violation of Rules 8210 and 2010 for falsifying statements to FINRA.
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