A Texas man was sentenced to 30 months in prison after pleading guilty to securities fraud. At the time of the fraud, Daniel Lutz Bergin was an equity trader for Cushing MLP Asset Management, which is located in Dallas.
While at the registered investment adviser, Bergin had discretionary assets under management of about $2.5B. He serviced institutional investors and high net worth individuals through portfolio and advisory management services.
However, from 2010 until he was fired in May 2013, Bergin engaged in a front-running scam involving the misuse of inside information when making trades in his wife’s brokerage account. He would use non-public, material data about big orders that he was able to access from Cushing. The information was supposed to be used for making trades on behalf of his clients. Instead, he also used the information to make trades through his wife’s account.
The government found evidence of numerous transactions in which Bergin traded in MLP securities when Cushing traded in them. He made illegal profits of over $3 million.
The Texas man is accused of making material omissions and false statements to the firm. Such actions are a violation of Cushing’s ethics code related to front-running trades. He also made false statements to the SEC about his personal trading.
In a related civil case brought by the SEC, Bergin will also pay over $1.38M and a $500K fine plus disgorgement. The Commission, when filing its complaint in 2013, accused Bergin of over 130 instances of front running client orders using his wife’s accounts and using privileged data to trade securities in her accounts a minimum of 400 times.
Ex-Cushing Trader Gets 30 Months For Securities Fraud, Law 360, April 27, 2015
Stock Trader Faces Front Running Charges In Alleged $1.7M Texas Securities Fraud, Stockbroker Fraud Blog, June 1, 2013
The SEC Complaint (PDF)