The Securities and Exchange Commission has filed settled charges against a Virginia based broker-dealer, Friedman, Billings, Ramsey & Co., Inc. (FBR) for its unlawful insider trading, failure to establish, maintain and enforce policies and procedures, and unregistered sales of securities while serving as the placement agent for a Private Investment in Public Equity (PIPE) offering by CompuDyne Corporation. Also charged today with separate violations were three of the company’s former executives, Co-Chairman and Co-Chief Executive Officer, Emanuel Friedman, Director of Compliance, Nicholas Nichols, and Head Trader, Scott Dreyer.
To settle these charges, FBR consented to pay USD3,755,839. Friedman and Nichols have each consented to pay USD754,046 and USD60,000, respectively. FBR, Friedman and Dreyer also consented to the entry of Commission orders censuring FBR and Dreyer, requiring Dreyer to pay USD19,870, ordering FBR to comply with certain undertakings, and barring Friedman from association in a supervisory capacity with any broker or dealer with a right to reapply for such association after two years.
The Commission’s complaint filed against FBR, Friedman and Nichols alleges that FBR failed to establish, maintain and enforce policies and procedures reasonably designed to prevent the misuse of material, nonpublic information in connection with the CompuDyne PIPE offering. FBR also unlawfully traded while aware of material, nonpublic information and conducted unregistered sales of securities.
“Insider trading by regulated entities is completely unacceptable,” says Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement. “Broker-dealers have an especially high duty to maintain adequate policies and procedures to prevent the misuse of the material, nonpublic information with which they are entrusted. FBR violated that duty and today’s action holds the firm accountable for its conduct.”
“Individuals who exercise control over regulated entities will be held responsible when they fail to ensure that those entities comply with their obligations under the federal securities laws,” adds Daniel M. Hawke, the District Administrator of the Commission’s Philadelphia Office. “The individuals charged in today’s complaint failed to do so and are being held accountable for their failures to ensure FBR’s compliance with those obligations.”