Ex-Morgan Stanley broker pleads not guilty to insider trading

Authorities say he and clients made millions trading on secret tips about pending mergers.
SEP 05, 2017
By  Bloomberg

A longtime Morgan Stanley broker and financial adviser pleaded not guilty to trading on secret tips about pending mergers and acquisitions leaked by a Bank of America Corp. consultant. Michael Siva, 55, got the information from a close friend, James Moodhe, whose daughter was dating the consultant at the center of the case, Daniel Rivas, prosecutors said in an August indictment. In a statement, Morgan Stanley described Siva as a former wealth management employee and didn't provide details about his apparent departure from the company. Siva, of West Orange, New Jersey, is one of seven people charged in the alleged scheme. Rivas and Moodhe have pleaded guilty and are cooperating with the government. Prosecutors said Rivas gave the hand-written tips to his girlfriend to give to her father, who then passed them on to Siva using code phrases on the phone or by reading them aloud at secret meetings. Wearing a dark blue suit and saying little, Siva entered his plea on Tuesday in a nearly empty federal courtroom in Manhattan. U.S. District Judge Alison Nathan extended the former broker's bail and set a three-week trial for September 2018. The others charged are friends and associates of Rivas and Moodhe, who created several "tipping chains" that benefited different groups, according to prosecutors. Rivas's girlfriend wasn't charged. Assistant U.S. Attorney Andrea Griswold told the judge that the government would provide "voluminous" trading records, text messages and emails to prove its case. Siva's lawyer, Paul Shechtman, declined to comment after the hearing. DINER MEETINGS Moodhe passed Rivas's inside information to Siva from at least 2015 to April 2017, so Siva could use it to execute profitable trades for himself and his clients, including Moodhe, prosecutors said. Their in-person meetings, at diners outside New York City, were intended to avoid detection, according to the U.S. "During these meetings, Moodhe read from pieces of paper provided to him by Rivas, which contained detailed information about confidential impending deals, including ticker symbols, deal values and expected announcement dates," prosecutors said. Rivas was a project consultant in Bank of America's capital markets technology group in New York. As a member of the team responsible for supporting the bank's computer system, he had access to a deal-tracking system that contained data about corporate transactions, including impending mergers, acquisitions and tender offers, according to the U.S. BofA Merrill Lynch said in an emailed statement in August that it fired Rivas and is cooperating with the government. MADE MILLIONS Siva and Moodhe made a total of more than $3 million by trading before and after deals were announced, while Siva also made thousands of dollars on commissions, the U.S. said. One of Siva's most profitable trades was a purchase of 30,000 shares of ZS Pharma on behalf of Moodhe and Siva's clients, just before it was announced in 2015 that AstraZeneca Plc was buying the company for $2 billion. The men sold all their shares after the announcement and made a total of almost $600,000, prosecutors said. In another set of allegedly corrupt trades, Siva and Moodhe in 2016 each purchased thousands of shares of St. Jude Medical Inc. just before its impending $25 billion acquisition by Abbott Laboratories. The men, neither of whom had invested in St. Jude Medical before, sold all their shares after the deal was publicly announced in April 2016, garnering a total of more than $450,000, the U.S. said.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.