James Stewart Meagher, of New York, New York, a stockbroker formerly registered with World Trade Financial Corporation, has been charged by Financial Industry Regulatory Authority (FINRA) Department of Market Regulation in a Complaint alleging that he effected a fraudulent investment scheme and obstructed a FINRA investigation into his trading activities. Department of Market Regulation v. James Steward Meagher, No. 20110305098-02 (Sept. 1, 2017).
According to the Complaint, Meagher attempted to manipulate the closing prices of stocks through placing orders to buy and sell the securities just prior to the market close; a fraudulent scheme that FINRA labeled as marketing the close. Particularly, between November of 2011 and February of 2012, during which time he was registered with Chardan Capital Markets LLC, he placed eleven over-the-counter equities transactions for the firm’s proprietary investment accounts minutes before markets closed during the last day of the month that trades could be placed. The Complaint indicated that the eleven transactions involved SRGL, TRON, VMCT and ONAVQ.
Apparently, orders placed by Meagher were priced at higher rates than the inside offer during the point in which they had been effected, wherein the placement of trades caused the closing prices on the stock to be increased. The Complaint stated that Meagher was apprised of the securities’ best bids and offers by way of the firm’s electronic stock quote systems; yet he sought to effect transactions with firms that were selling the securities at substandard prices.
The Complaint further alleged that Meagher was warned that the transactions he sought to effect were outside the spread; however, alerts in that regard were disregarded by Meagher. Meagher’s actions seemingly caused Chardan Capital’s proprietary account values to be adjusted; a result that led Meagher to be compensated more favorably. Consequently, FINRA Department of Market Regulation alleged that Meagher’s conduct was violative of Securities and Exchange Act Section 10(b), Securities and Exchange Commission (SEC) Rule 10(b)-5, as well as FINRA Rules 2020 and 2010.
Meagher was also alleged to have pursued a second fraudulent scheme involving investor JA, wherein he encouraged JA to buy shares of Facebook via an initial public offering. As a result, JA reportedly transferred $25,080.00 to Meagher to buy Facebook at thirty-eight dollars a share for a total of six-hundred and sixty shares. Yet, the Complaint indicated that JA’s funds were utilized to buy five-hundred and seventy-nine shares, with over $3,000.00 having been misappropriated by Meagher for his personal benefit.
The Complaint alleged that unbeknownst to JA, shares were sold shortly thereafter at thirty dollars a share, wherein Meagher obtained the proceeds to use for his gambling and traveling activities. JA apparently requested the sale of Facebook shares after Meagher became associated with World Trade Financial Corporation, leading Meagher to falsify a transaction involving JA’s funds having been sold on November 14, 2012, at twenty-one dollars a share.
The Complaint stated that the customer was never apprised that JA’s Facebook shares were liquidated in May of 2012 or that the commissions accumulated by Meagher amounted to $17,155.00. Moreover, Meagher only sent $7,000.00 to JA after reporting that $13,860.00 would be wired. Consequently, FINRA alleged that Meagher’s conduct was violative of FINRA Rules 2020, 2010, as well as Securities and Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5.
Furthermore, FINRA alleged that in the course of its investigation into Meagher’s activities, Meagher claimed that JA loaned Meagher funds that were repaid. However, FINRA stated that JA instead provided the funds to Meagher for an investment. FINRA alleged that Meagher falsified statements in that regard which misled the regulator; conduct violative of FINRA Rules 2010 and 8210.
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Meagher’s activities were subject of a Wells Notice Examination on January 13, 2016, where FINRA disclosed that it planned to bring regulatory action against Meagher for engaging in conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, as well as FINRA Rules 8210, 2010, and 2020.
Since May 11, 1994, Meagher has been associated with ten different broker dealers, four of whom have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct.
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