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SEC Charges Arizona Equity Research Firm with Wash Trading

January 26, 2015 — Wash trading is a prohibited trading practice by which purchase and sale orders of a particular stock are made within seconds of one another at virtually identical quantities and prices. Wash trades are abusive because they mislead the investing public concerning a stock’s genuine supply and demand. The trades involve no actual change in the security’s beneficial ownership. To help fight this sort of corruption and fraud in the securities market, the U.S. Congress initiated a whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The program authorizes awards for informants who alert the Securities and Exchange Commission (SEC) to credible, specific and timely information concerning an imminent or ongoing fraudulent scheme. Whistleblowers could receive from ten to thirty percent of the amount the government recovers, provided the amount exceeds $1 million.

Phoenix Equity Research Firm Owner Allegedly Manipulated Share Price of Publicly Traded Stock for Which He Was Seeking Investors

The SEC has charged Paul Pollack and his firm Montgomery Street Research LLC with engaging in wash trading to manipulate the stock price of a company and with acting as brokers for the company without the required SEC registration.
Pollack and Montgomery Street Research were retained in two private placement offerings to raise capital for a company and to generate interest among investors in the stock. Trading in the company’s shares was sparse. To drum up business, Pollack and Montgomery Street Research allegedly engaged in 100 wash trades of the company’s stock over a one-year period. The misleading trading activity made it appear to investors that there was more trading activity in the shares than actually existed.
Pollack and Montgomery Street Research allegedly located potential investors, provided them with information concerning the company and at times received transaction-based compensation. They raised more than $2.5 million from 11 investors.

Whistleblowers Notify SEC of Wash Trading Violations

While Waters & Kraus was not working with the whistleblower on this SEC matter, we are representing tipsters in similar instances of SEC fraud. If you have comparable claims against your employer or anyone else engaged in securities violations, contact us or call our qui tam attorneys at 855.784.0268. Our qui tam lawyers, George Tankard and Anne Izzo in our Maryland office, are committed to advancing and protecting informants’ interests in whistleblower lawsuits.
Contact us by email or call 855.784.0268 to learn more about our practice and how we can work together to notify the government about SEC fraud and abuse.

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