On April 15, 2013, the SEC charged David Miller, a former employee at a Connecticut-based brokerage firm, with scheming to personally profit from placing unauthorized orders to buy Apple stock. When the scheme backfired, it ultimately caused the firm to cease operations. David Miller, an institutional sales trader who lives in Rockville Centre, New York, has agreed to a partial settlement of the SEC’s charges.

The SEC alleges that Miller misrepresented to Rochdale Securities LLC that a customer had authorized the Apple orders and assumed the risk of loss on any resulting trades. The customer order was to purchase 1,625 shares of Apple stock, but Miller instead entered a series of orders totaling 1.625 million shares at a cost of almost $1 billion. Miller planned to share in the customer’s profit if Apple’s stock profited, and if the stock decreased he would claim that he erred on the size of the order. The stock wound up decreasing after an earnings announcement later that day, and Rochdale was forced to cease operations in the wake of covering the losses suffered from the rogue trades.

According to the SEC’s complaint, Apple’s stock price decreased after Apple’s earnings release was issued on October 25. The customer denied buying all but 1,625 Apple shares, and Rochdale was forced to take responsibility for the unauthorized purchase. Rochdale then sold the Apple stock at an approximately $5.3 million loss, causing the value of the firm’s available liquid assets to fall below regulatory limits required of broker-dealers. Rochdale had to cease operations shortly thereafter.

Miller is charged with violations of Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. To settle the SEC’s charges, Miller will be barred in separate SEC administrative proceedings from working in the securities industry or participating in any offering of penny stocks. In the partial settlement, Miller agreed to be enjoined from future violations of the antifraud provisions of the federal securities laws. A financial penalty will be determined at a later date by the court upon the SEC’s motion.