Loose lips sink ships in brokerage

Loose lips sink ships in brokerage

Loose lips sink ships in brokerage Two former San Diego advisors with National Planning Corporation, America’s 15th largest independent broker-dealer, recently pleaded guilty to conspiracy to commit securities fraud and insider trading.

"They are just normal dudes and they just screwed up," says Jeremy Warren, the lawyer for one of the advisors. “I guess the SEC is doing a great job because they are focusing on a lot of small transactions. This isn't Raj Rajaratnam [Galleon Group hedge fund]."

A fiduciary duty might have prevented this from going as far as it did. 

In addition to the federal charges, the SEC is conducting a parallel case for insider trading. The alleged insider trading took place over a three-year period between April 2009 and April 2012. The two former advisors have agreed to a lifetime ban from the securities industry.

It all started when Matthew Fefferman, the senior director of information technology for Ardea BioSciences, a San Diego-based pharmaceutical company, provided his brother-in-law Chad Wiegand with several tips about the company, including information about licensing deals for a new cancer drug and the sale of the company to AstraZeneca.

Fefferman felt sorry for Wiegand who was struggling financially as a single father.

Wiegand could have ended it there but chose to pass the tips along to fellow broker Akis Eracleous who in turn passed on the information to both clients and relatives, resulting in illegal profits of $530,000, of which $219,175 has been recovered by the SEC.

"For Akis it's really sad," Warren says. "He's a third-hand tippee. He really threw away a career for what he did. He gets it now."