ORLANDO (CN) – A Houston-based broker put two Florida municipalities at risk of losing as much as $60 million by “unauthorized and unsuitable trading” on their behalf, while taking more than $14 million in commissions from the, the SEC says. It claims Harold H. Jaschke, formerly a registered rep for (nonparty) First Allied Securities, churned the accounts of Kissimmee and the Tohopekaliga Water District “and lied to both customers about his trading practices on their behalf.”
“Jaschke was unscrupulous with the municipalities’ funds and ignored their interests for his own personal gain,” an SEC spokeswoman said in a statement announcing the federal lawsuit. “He lied to his customers, took advantage of their trust, and risked their financial well-being.”
Jaschke churned high-risk, zero-coupon U.S. Treasury bonds, “buying and selling the same bond within a matter of days, and sometimes within the same day,” the SEC said in the statement. “Jaschke exposed the municipalities to greater risks when he leveraged their accounts using repurchase agreements to finance the bond purchases that they otherwise would not have been able to afford. This strategy dramatically increased the risks as Jaschke caused the municipalities to borrow large sums of money to hold larger bond positions.”
The SEC says Jaschke knew that his clients’ ordinances prohibited that kind of trading. It seeks an injunction and disgorgement.