Trader who disclosed customers’ block order info captures FINRA’s attention
Kane H. Waller, a former registered representative with National Financial Services LLC, shared customers’ non-public block order information with one of his most significant customers on the same side of the market.
FINRA’s Department of Enforcement has filed a complaint against a trader who engaged in improper disclosure of customers’ block order information.
In summary, on three occasions from December 2, 2011 to January 17, 2017 (the “Relevant Period”), Kane H. Waller, a former registered representative with National Financial Services LLC (NFS), shared customers’ material non-public block order information with one of his most significant customers (“Customer A”) on the same side of the market. In each instance, Waller then executed trades for Customer A in the same securities that were the subject of his improper disclosure while the block order information was non-public.
During the Relevant Period, Waller worked as a sales trader on the Institutional Sales Trading Desk in NFS’s Fidelity Capital Markets division. One of Waller’s customers on the Institutional Desk was Customer A. Customer A was also a customer of NFS’s prime brokerage unit.
On December 2, 2011, Waller shared material, non-public information about a block order from a retail customer (“Customer B”) in Security I on the same side of the market with Customer A. Specifically, Waller informed a Customer A portfolio manager via Bloomberg message at 17:05:30 UTC (12:05:30 EST) that for Security I “we have retail seller 100K inline fyi.” Customer A responded at 17:08 UTC (12:08 EST): “short another 50k” and “get ahead of that.” Waller responded “k” and proceeded to complete the trade and short 50,000 shares of Security I. When Waller was shorting the 50,000 shares, Customer B’s block order information was non-public and material.
In early 2012, NFS’s compliance group identified Waller’s December 2, 2011 communication with Customer A and brought it to the attention of his supervisor. The supervisor met with Waller and cautioned him that his conduct was not acceptable.
In the face of his supervisor’s warning, Waller again shared material non-public information about customer block orders on the same side of the market with Customer A.
Sharing material, non-public trading information provided by one customer to another customer is a violation of high standards of commercial honor and just and equitable principles of trade.
By virtue of the foregoing, Waller violated FINRA Rule 2010 and FINRA Rule 5270.
When, in cases like this one, FINRA determines that violations of securities rules have occurred and formal disciplinary action is necessary and the Enforcement Department files a complaint with the Office of Hearing Officers, the Office arranges a three-person panel to hear the case.
FINRA’s Department of Enforcement requests that the Panel order that sanctions, including monetary penalties, be imposed, and order that the respondent bears such costs of proceeding as are deemed fair and appropriate.
