Front-running charge for trader

By Andrew Osterland

Jun 2, 2013 @ 12:01 am (Updated 2:05 pm) EST

The Securities and Exchange Commission has filed charges against a senior equity trader at Cushing MLP Asset Management LP for allegedly front running client orders.

Daniel Bergin, a trader based in Dallas, allegedly made at least $1.7 million in profits trading securities before executing large orders of the same securities for clients of Cushing.

He used accounts registered to his wife to conduct his personal trades, the SEC alleged.

Cushing, a registered investment advisory firm owned by Swank Capital LLC, specializes in investments in master limited partnerships and energy-related securities.

“Bergin betrayed the trust of his clients by secretly using information about their trades to gain an unfair trading advantage and reap massive profits for himself,” Marshall S. Sprung, deputy chief of the SEC Enforcement Division's Asset Management Unit, said in a statement.

The complaint alleges that “more than $520,000” of $1.7 million in profits earned in Mr. Bergin's wife's accounts between 2011 and 2012 came from 132 specific instances of front running client orders.

The SEC said that it also identified “at least 400” occasions in which he used privileged information to trade securities in his wife's accounts.

The SEC named Mr. Bergin's wife, Jacqueline Zaun, as a relief defendant in order to recover allegedly illegal profits from her accounts.

As Cushing's primary equity trader, he was privy to information about the timing and extent of trades that the firm made for clients.

According to the SEC complaint, Cushing had a policy that prohibited employees from personal trading in securities within seven days of a client's trades.

Mr. Bergin, 40, failed to disclose the existence of Ms. Zaun's accounts or of the trades he made within those accounts, the complaint said.

“Bergin's misconduct is particularly egregious because his firm depended on him to manage market exposure and risk for its investments,” said David R. Woodcock, director of the SEC's Fort Worth regional office, which conducted the investigation.

The SEC received a court order to freeze the couple's assets.

The SEC is seeking disgorgement of “illicit trading profits,” interest and fines, as well as a permanent injunction against Mr. Bergin.

Swank has fired him.

“As the SEC complaint makes clear, these illegal trades were actively concealed from the firm,” Swank said in a statement provided by spokesman Jonathan Morgan.

Mr. Bergin couldn't be reached for comment.

  @IN Wire

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