New York (HedgeCo.net) – Financial Industry Regulatory Authority (FINRA) has permanently barred a former Deutsche Bank broker from the securities industry for manipulating the price of Monogram Biosciences (MGRM) stock in an effort to enrich a hedge fund client, himself and his family.
A FINRA panel found that Edward S. Brokaw was engaged in a pattern of trading designed deliberately to drive the value of MGRM stock down and, in turn, drive up the value of contingent value rights (CVRs) on that stock.
According to FINRA, Brokaw’s hedge fund client held approximately 18.5 million CVRs – nearly 30 percent of the 64.8 million MGRM CVRs outstanding. For every penny the final VWAP dropped below $2.90, the value of the hedge fund`s CVRs increased by $185,000.
If the maximum payout of $.88 per CVR were achieved, FINRA said, the hedge fund would receive approximately $16 million. Brokaw and his family owned 217,000 of the CVRs, with a potential maximum payout of $188,000.
Included in the evidence against Brokaw were tape recordings of his phone calls to his firm`s trading desk to place sell orders. In one phone call, Brokaw told a Deutsche Bank sales trader, “Take 50,000 MGRM at the market. Sell it down. Sell it as low as you want. Sell it hard, 50,000.”
FINRA also found that Brokaw violated a Deutsche Bank’s policy by only completing one “booking ticket” each day, each showing a single 100,000-share order to sell, each with a false notation that the order was given by the client directly to the trading desk rather than to Brokaw – thus circumventing automatic branch office compliance review of the orders.
Deutsche Bank first suspended, then terminated Brokaw based on his MGRM sales orders for the hedge fund.
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