SEC Goes After Trader for Kickback Scheme on IPO Info

The Securities Exchange Commission claims in court that stock trader Adam Rentzer, 52, paid undisclosed cash kickbacks to a broker for inside information on upcoming initial public offerings.

The SEC claims that broker Brian Hirsch, “had a long-running arrangement that circumvented allocation policies and procedures at two major brokerage firms, where Hirsch worked on the wealth syndicate desk, so as to give Rentzer larger allocations of coveted public offerings being marketed by the firms than he would otherwise have received,” according to the SEC.

The SEC’s complaint, filed in the District Court of New Jersey, claims that Hirsch did not disclose the kickbacks or anything concerning his arrangement with Rentzer to either firm he worked at. The complaint also alleges that Hirsch made false claims that he had not entered into any quid pro quo arrangements concerning public offerings.

Rentzer’s paid kickback deal was equal to 25 percent of what he made from trade profit to be paid out to Hirsch. In most cases, Rentzer would allegedly sell stock as soon as possible, creating a large profit, according to the complaint.

“Rentzer made approximately $800,000 in trading profits on the offering allocations he received from Hirsch, and, pursuant to their arrangement, Rentzer paid Hirsch approximately $200,000 based on those trading profits,” the SEC alleges in the 18-page complaint.“Through their scheme, Rentzer and Hirsch defrauded the brokerage firms that employed Hirsch by using deception to subvert the firms’ allocation policies and procedures so as to enable Rentzer to gain greater access to lucrative offerings at the expense of the firms’ other brokerage customers.”

Hirsch had previous complaints filed against him by the SEC. In December of 2017 Hirsch plead guilty to charges for his involvement in a kickback scheme.

The SEC’s action seeks civil penalties against Rentzer and forfeiture of his  “ill-gotten gains,” according to the complaint.

The SEC is represented by Todd Brody in New York.

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