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Rochdale Securities is probing whether a former trader worked with others outside the firm in an alleged stock manipulation scheme involving the purchase of $1 billion worth of Apple shares, The Post has learned.
The Stamford, Conn., brokerage firm, which is fighting for survival, is trying to piece together what led the ex-employee, identified by sources as David Miller, to purchase 1.6 million Apple shares instead of fulfilling an order to buy 160,000 on behalf of a client.
Rochdale has been working with regulators and investigators — including the Financial Industry Regulatory Authority, the Securities and Exchange Commission and the FBI — to get to the bottom of the errant Oct. 25 Apple trade.
Executives including Rochdale CEO Dan Crowley have told investigators that they believe the trade was done deliberately in order to influence the stock price as part of a scheme that netted roughly $20 million in profits, according to sources familiar with the matter.
The speculation is that Miller was working with a group of outside traders who sold the stock short — or bets that the price of Apple shares would fall.
Apple shares have traded lower since the $1 billion purchase on Oct. 25, the day before the tech titan’s fiscal fourth-quarter results were announced.
Miller, who left the firm the day after placing the trade, could not be reached for comment. He has not been charged with wrongdoing, and sources say that he has told executives that the trade was inadvertent.
Insiders describe Miller as a 20-year veteran who largely kept to himself. He managed a relatively small number of accounts and did not generate a lot of revenue for the firm, sources added.
Both the firm and Miller have hired legal counsel, according to people familiar with the situation.
Sources said that Miller placed the trade just after the opening bell and continued to accumulate shares throughout the day.
Shortly after the close of regular trading, executives discovered the outsize Apple trade and reported it to Finra, the security industry’s self-regulatory watchdog.
Finra instructed Rochdale to unwind the trade that same day, which it proceeded to do, according to sources close to the firm.
The actual hit to Rochdale’s balance sheet is believed to be between $5 million and $8 million — small when compared to other Wall Street debacles such as JPMorgan Chase’s $6.2 billion in “London Whale” trading losses.
Still, that is enough to imperil the small broker-dealer, which had only about $3.5 million of net capital to cover potential losses.
Rochdale CEO Crowley has been racing to find a white knight — a buyer or an investor — to prop up the firm without success.
Sources say the closely held firm, which reported third-quarter results the day after discovering the masive Apple trade, held off disclosing the losses to give management more time to resolve the situation.
Rochdale declined to comment.