From BDbuzz.com: Rocky Mountain High - a BD Liquidation
bdbuzz.com
Posted March 10, 2003
by Mordechi
It is rare for the SIPC to come in and shut down/liquidate a firm.
But here's the shorthand of what happened just one month ago, Today:
**Rocky Mountain Securities, a Colorado based Broker Dealer**
Apparently one broker at the firm had a penchant for trading. Her problem was that she lost consistently, in a big way. But she needed more money to back her trading... Clever girl, she noticed that there was one account at the firm that never seemed to get touched... It was a firm account, but nothing was ever done with it, no transactions for as far back as she could see. So, figuring nobody would notice, she took just a little money from the account, and transferred it to her own acct for trading. Which she promptly lost. So, she went ahead and bled the account a little more. And a little more. Till her trading became a tru hemmorage, ultimately running into the $4MM range. Everything was going well, as far as CleverGirl could tell - she just needed to make up the losses, and nobody would be the wiser...
BUT - the account she was stealing from turned out to be the firm's **NET CAPITAL account**!...
OOps! The NASD got wind and shut them down two days later...
And then, things got worse... And the NASD discovered the true nature of the Net Cap Account. The account had been funded following the instructions below, which only a bunch of True Geniouses could think up:
Rocky Mountain EZ Guide To Create Net Cap From Thin Air:
1) Get a few really rich clients
2) Get a whole lot of not so rich clients
3) Transfer the client Balances Into New, Empty Net Cap Acct
4) Tell No One!
Done!
But now the net cap was gone, as was the savings of all the pilfered accounts.
Today, one month later:
SEC files charges...
SIPC steps in and liquidates all assets...
CleverGirl awaits a comfy room and three square at Club Fed...
Ahhh, the cool, brisk, Rocky Mountain High... |
