Rochdale Securities

Remember David Miller? Rochdale Securites trader who masterminded a scam that involved the “unauthorized purchase of about $1 billion in Apple stock,” which he claimed was for a client (a lie)? Forget to dot a few essential i’s and cross a few crucial t’s in the scheme, which contributed to its failure and left the firm in a “negative capital position”? Robbed the universe of Dick Bové research for a time? Which thankfully turned out to be a very short amount of time, i.e. the period between Bové’s resignation from Rochdale and the announcing of the winner of the Dick Bové Sweepstakes? Yeah, he’s going to jail. Read more »

There are a lot of good options and I’m not prepared to make a definitive choice at this time, but I can at least say that one of my favorite recent financial crooks is David Miller, the doofus who put a fat suit on his finger, bought 1.6 million instead of 1.6 thousand Apple shares, and brought down Rochdale Securities. His story is nearing its sad conclusion:

David Miller, an institutional sales trader who lives in Rockville Centre, N.Y., has agreed to a partial settlement of the SEC’s charges. He also pleaded guilty today in a parallel criminal case.

The SEC alleges that Miller misrepresented to Rochdale Securities LLC that a customer had authorized the Apple orders and assumed the risk of loss on any resulting trades. The customer order was to purchase just 1,625 shares of Apple stock, but Miller instead entered a series of orders totaling 1.625 million shares at a cost of almost $1 billion. Miller planned to share in the customer’s profit if Apple’s stock profited, and if the stock decreased he would claim that he erred on the size of the order. The stock wound up decreasing after an earnings announcement later that day, and Rochdale was forced to cease operations in the wake of covering the losses suffered from the rogue trades.

The phrase “planned to share in the customer’s profit” is a little vague, and when we first talked about Miller I assumed that he was hoping to claim a fat finger either way and just keep the profits for Rochdale. Nope – Miller’s customer was in on the plan. From the criminal complaint: Read more »

Last month, “noted bank analyst” Dick Bové informed the people that after careful consideration, he had finally selected the lucky winner of the Dick Bové Sweepstakes, tapping Rafferty Capital Markets LLC to be his new employer over a large pool of suitors banging down his door. Today, Bové’s colleague/unofficial spokesman/son none of us knew about until now sent a letter to clients re: the new gig (and some background about the selection process) containing good news and bad news.

The bad news: As previously noted, Dick Bové apparently has a son who he works with, i.e. we could have lived in a world where there was a firm called Bové & Sons, if only they’d struck out on their own!

The good news: The duo will start cranking out the good stuff on January 28, if all goes according to plan. Read more »

  • 14 Dec 2012 at 2:36 PM

Nobody Puts Dick Bové In A Corner

Noted bank analyst Dick Bove is planning to submit his resignation from Rochdale Securities LLC on Monday, according to a person familiar with his plans. Mr. Bove has remained at Stamford, Conn.-based Rochdale as it has searched for a rescue since Oct. 25, when a trade in shares of Apple left it in what President Daniel Crowley called a “negative capital position.” […] Mr. Bove has been unable to publish stock research since the errant trade, because Rochdale’s cash shortfall has prevented the firm from trading securities or issuing analysis. [WSJ, earlier]

Dick Bove, the bank analyst whose brokerage, Rochdale Securities LLC, is struggling to survive after an unauthorized $1 billion Apple Inc. trade, said he’s been interviewing for a new job. Bove said he has narrowed his choice to three firms, which he declined to name, and will make a decision by about Dec. 15. The 71-year-old analyst said he’s giving Daniel Crowley, Rochdale’s chief executive officer, time to seek rescue financing after a loss on the Apple trade decimated the firm’s capital. “I indicated to them that my loyalty is with Dan Crowley and so I couldn’t make a decision until Dan threw in the towel,” Bove said today in a telephone interview. “The decision I make is really based on whether I want to stay with a small firm and write what I’m going to call provocative research or whether I want to go back in the general Wall Street milieu, dealing with corporate finance issues.” [Bloomberg]

A thing we sometimes like to do around here is use stories ripped from the headlines to illustrate to you, in case hypothetically this should ever be of any practical interest, how – and how not – to safely and effectively engage in financial fraud. This Rochdale guy was just arrested by the FBI, so I guess he’s a “how not” story, though I’m a little torn because I like part of his style. From the complaint:

[A] representative of Customer #1, who will be referred to as “Customer Rep. #1,” sent an instant message to [now-former Rochdale trader David] MILLER to buy Apple stock every half hour. Specifically, the message read “b 125 ok (per 1/2 hr).” MILLER confirmed that he would do so.

Records reflect that shortly after receiving this order, MILLER began trading in Apple. Over the course of the day, MILLER entered multiple, separate orders in Rochdale’s order management system in the amount of 125,000 shares. Each such order was executed over a period of time through various trading platforms to which Rochdale had access, including, but not limited to, a system that gave Rochdale direct electronic access to the New York Stock Exchange. Once MILLER fully executed one order for 125,000 shares, he would close out the order and promptly enter a new order into Rochdale’s order management system.

He ended up with a total of 1,625,000 shares, or 1,623,375 more than the customer ordered. Then of course the stock went down and so, more or less, did Rochdale. Reuters notes that “At the time, Miller told his superiors the purchases had been a fat finger error,” though you’ll note that the actual pattern of trading requires fifteen separate fat finger errors. Less “fat finger” and more “fat brain,” or “fat misreading of a client IM.” Still it has the whiff of almost plausibility about it; who among us has not misplaced three zeroes at some point in our financial lives?1

But then there’s this: Read more »

  • 02 Nov 2012 at 12:47 PM

Dick Bové Needs Your Help

Rochdale Securities LLC, the 37-year- old brokerage that employs bank analyst Dick Bove, is seeking a capital injection after a trading error, said three people with knowledge of the firm’s situation. Executives at Rochdale are telling employees and potential investors that a trader at the firm made an unauthorized purchase of Apple shares, which has eroded the capital of closely held Rochdale, said one of the people, who declined to be identified because the overtures have been private. [Bloomberg]