Merrill Lynch Ex-Trader Faces SEC Hearing
A former Merrill Lynch mortgage trader whose allegedly unauthorized transactions resulted in heavy trading losses for the firm will face a hearing on fraud charges, the Securities and Exchange Commission said Monday.
The SEC charged that Howard A. Rubin, the former head mortgage-backed securities trader at Merrill Lynch Government Securities, willfully violated federal anti-fraud laws in connection with trades in April, 1987.
“A hearing will be scheduled to determine whether the allegations against Rubin are true, and if so, to decide what remedial action, if any, is appropriate,” Edwin H. Nordlinger, deputy regional administrator of the SEC’s New York office, said in a statement.
If Rubin is found guilty, he could face sanctions ranging from the following:
- Temporary suspension from securities trading.
- Limited trading activities.
- Lifetime ban from the business.
Rubin, who was fired from Merrill Lynch, works as a mortgage securities trader at Bear Stearns & Co., a spokeswoman for the latter firm said.
An attorney representing Rubin, Ira Lee Sorkin, said Rubin denies he committed any fraud.
“He has had an outstanding reputation in the industry and an unblemished record,” Sorkin said. “And we intend to litigate this matter to the hilt.”
Sorkin said the SEC’s action appears based entirely on an allegation that Rubin did not follow his supervisors’ instructions.
“How the SEC regards this as a violation of the federal securities laws is beyond our imagination,” he said.
Allegedly unauthorized transactions by Rubin while he was at Merrill Lynch were blamed by the company as a major reason for huge trading losses that cut the investment firm’s pretax earnings by about $275 million in the second quarter of 1987.
The transactions involved hundreds of millions of dollars of certain types of mortgage-backed securities, which represent mortgages that are pooled and then packaged as marketable securities for sale to investors.