William Norris Jordan Jr., of Philadelphia, Pennsylvania, a stockbroker with Kildare Capital, Inc., was named in a Complaint by Financial Industry Regulatory Authority (FINRA) Department of Enforcement alleging that Jordan partook in a deceptive and fraudulent scheme concerning round trips of municipal securities, charged customers excessive prices, and provided false information to his firm as well as FINRA in the course of investigating his misconduct. Department of Enforcement v. William Norris Jordan Jr., No. 2012031748203 (July 3, 2016).
According to the Complaint, between November 2009 and August 2011, Jordan orchestrated a scheme which involved the pre-arranged offering, sale, and facilitation of seven separate round-trip transactions involving municipal securities. FINRA alleged that Jordan’s conduct was pre-arranged, and intended for the purpose of making it appear that there was legitimate market activity concerning the securities. The Municipal Securities Rulemaking Board’s systems reported the transactions in real time, and such information was made known to the public through the Electronic Municipal Market Access system.
The Complaint stated that the round trip transactions were set in motion through Jordan first selling the municipal securities to CH, an interdealer broker, where Jordan would purchase, at the same time, such municipal securities back from CH but at an increased price. FINRA alleged that in six of the seven instances, Jordan’s purpose was to disguise how much Kildare Capital paid for the securities, as well as how the mark-ups were being applied to customers.
Jordan reportedly marked up these securities (via round trip transactions) at a price that exceeded the acquiring costs just prior to selling the securities to customers. FINRA noted that in one of the instances, Jordan’s aim was to disguise mark-ups in order to avoid a loss in the course of transactions resulting in sales to customers.
In one round trip example, on August 23, 2011, Jordan, by acting on behalf of Kildare, placed two transactions to purchase a municipal bond (CUSIP No. 246579ER3) at prices of 105.862 and 102.50. Approximately two minutes after his second transaction, in which his purchases totaled 710 bonds by that point, Jordan sold the 710 bonds to an inter-dealer broker at an increased price of 106.112.
Jordan then reportedly purchased the 710 bonds back at a price of 106.137. Minutes later, Jordan ultimately sold the bonds to a customer at an increased price of 106.437. As a result of these transactions, Jordan and Kildare profited in the amount of $5,081.70.
The Complaint alleged that Jordan failed to inform market participants or any other customers about the pre-planned nature of his round trip transactions. According to FINRA’s Department of Enforcement, Jordan raked in an estimated $66,493.55 profit in connection with the round trip transactions. FINRA alleged that Jordan’s conduct was violative of MSRB Rule G-17, Securities Exchange Act of 1934 Section 10(b), and Securities and Exchange Commission Rule 10b-5.
FINRA further alleged that with six of the round trip transactions, customers were sold the securities by Jordan at prices, which include mark-ups, that were unreasonable or unfair in consideration of the circumstances present. FINRA alleged that Jordan acted willfully in violating MSRB Rules G-17 and G-30.
According to the Complaint, Jordan further published his transactions to MSRB pertaining to the buying and selling of the securities, where Jordan was cognizant that such fabricated purchases and sales were the result of his fraudulent scheme. FINRA alleged that Jordan’s willful conduct in this regard was violative of MSRB Rules G-17 and G-14.
Apparently, from April 2013 through October 2014, Jordan falsified statements to his firm in a March 11, 2013 request, where Jordan attempted to explain the basis of his round trip transactions. Jordan reportedly claimed to his firm that the round trips with the inter dealer broker were designed to provide the inter dealer broker with compensation for the broker’s valuable services. FINRA found such statement to be false, as the purpose of Jordan’s transactions was to effectuate a fraudulent pre-arranged round trip scheme.
In addition, Jordan apparently made false statements to FINRA upon FINRA personnel investigating his misconduct. Specifically, FINRA requested that Jordan provide recorded testimony regarding his conduct, per FINRA Rule 8210. Throughout the course of this testimony with FINRA, Jordan also claimed that his purpose concerning his round trip transactions was to compensate one of his inter-broker dealers for services, including the showing of bond offerings to him and his firm, where Jordan claimed such services were valuable.
FINRA alleged that Jordan’s aforementioned statements were false given that the seven round trips that Jordan executed with the inter-broker dealer constituted deceptive and misleading market activity, and could not therefore be associated with a valuable service that was rendered. FINRA alleged that Jordan’s false statements were violative of FINRA Rules 2010 and 8210.
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