FINRA Bars Broker for Insider Trading in Japanese Securities

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has barred Kenneth Ronald Allen, a former equity trader at First New York Securities L.L.C., from the securities industry for trading Japanese securities on the basis of material, non-publicized information that he received from a corporate insider.

Cameron K. Funkhouser, Executive Vice President of FINRA's Office of Fraud Detection and Market Intelligence, said, "Individuals who are registered with FINRA are expected to observe high ethical standards and conduct themselves in accordance with just and equitable principles of trade regardless of where securities are listed."

FINRA's investigation found that in September 2010, Allen placed orders using a firm proprietary trading account from New York City to short sell shares of Tokyo Electric Power Company Inc. (TEPCO), which is listed on the Tokyo Stock Exchange. Allen created a short position in TEPCO shares while he was in possession of material, non-publicized information that TEPCO was close to announcing a secondary public offering of its securities. Allen obtained the material, non-publicized information from a consultant whose source was a Tokyo-based employee of Nomura Securities Co. Ltd., a large Japanese broker-dealer, which underwrote the TEPCO offering.

After receiving the inside information, Allen traded in TEPCO shares between September 15, 2010, and September 28, 2010. TEPCO publicly announced the secondary offering on September 29, 2010, and the market price for its shares declined. Allen covered the short position after the announcement, realizing a profit of approximately $206,000.

FINRA found that Allen's conduct violated FINRA Rules to observe high standards of commercial honor and just and equitable principles of trade.

In settling this matter, Allen neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

FINRA's investigation was jointly conducted by the Office of Fraud Detection and Market Intelligence and the Department of Enforcement.

Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2013, members of the public used this service to conduct 16.5 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.