Peter C. Harvey, Attorney General

Division of Consumer Affairs
Reni Erdos, Director

NEWARK - The New Jersey Division of Consumer Affairs' Bureau of Securities has barred a pair of traders from working in the securities industry in New Jersey after finding they concocted and carried out a $1.4 million fraud scheme, Attorney General Peter C. Harvey, Consumer Affairs Director Reni Erdos and Bureau of Securities Chief Franklin L. Widmann said.

Under the terms of separate consent orders, Brian P. Delaney, of Morris Plains, and Nicole M. Shkedi, of Manalapan, are prohibited from working as agents, broker-dealers or investment advisers after an investigation by the Bureau found the two were involved in a trading scheme that diverted $1.4 million in profits from their employer, Knight Securities, L.P. The profits were then placed into an account secretly operated by Delaney. Knight Securities, L.P. maintains its principal place of business at 525 Washington Ave., Jersey City.

Delaney pled guilty today in federal court before U.S. District Judge Katharine Hayden to charges of conspiracy and wire fraud in connection with the scheme to defraud Knight Securities. The Bureau of Securities conducted its investigation in conjunction with the U.S. Attorney's Office, District of New Jersey, and the Securities and Exchange Commission.

As part of the scheme, Delaney and Shkedi executed certain limit orders that were used to buy or sell stocks at set prices. The prices on orders for the purchases and sales of stocks were far better than the prevailing market prices at the time. For example, orders that came in for the purchase of certain stocks offered to buy the stocks at prices lower than the amounts Knight and other firms were selling them for, while orders to sell certain stocks listed sales prices higher than what the market was willing to pay. Under normal circumstances, the orders would not have been executed.

However, because Delaney was, in actuality, the customer behind the transactions and the trader executing the orders, they went through, enabling Delaney to pay less than what other investors were paying for stocks and to sell the stocks for more money than what the market was paying honest investors.

To conceal his identity as the customer, Delaney put the names of other individuals on the brokerage accounts, known as nominee accounts. He and Shkedi then executed the orders.

"The defendants in this case deceived, cheated and stole," Attorney General Harvey said. "These are not individuals who should be entrusted to carry out transactions within the securities industry."

"Laws are in place for a reason and contrary to what these defendants may have thought, they're not meant to be broken," Erdos said. "This action sends the message we will make every effort to investigate and punish those who break New Jersey's securities laws."

"By executing the orders on both sides of the transaction, Delaney ensured that he profited and virtually eliminated any risk typically associated with investing," Widmann said. "Delaney's actions put him at an unfair advantage. As a trader, he pulled strings that enabled him to buy and sell stocks at prices that were better than what was available to the average investor. He abused his position and, as a result, is barred from working in the securities industry in New Jersey."

Shkedi was ordered to pay a civil monetary penalty of $25,000, half of which will be paid to the Securities and Exchange Commission. The Bureau's investigation is continuing in conjunction with the Washington, D.C., office of the SEC. Delaney and Shkedi are cooperating with the Bureau's investigation.

State investigator Steven Cash is handling the Bureau's investigation.