The SEC declared final an initial cease and desist order entered by an SEC administrative law judge (“ALJ”) against David W. Baldt (“Baldt”).
Baldt is a chartered financial analyst with over 37 years of experience in the securities industry, most notably in the area of fixed income. From 2003 until 2008, Baldt was the head portfolio manager for an investment firm, Schroder Investment Management North America Inc., located in Philadelphia (“Schroder”).
The ALJ found that Baldt engaged in insider trading and tipping, when he recommended to his family members, particularly his daughter, Julia Baldt and her mother and ex-wife of Baldt, Emily Kingsbury (“Kingsbury”), to sell their holdings in a Short-Term Fund (the “Fund”) that he managed, while in possession of material non-public information. In 2008, Julia, because of her growing concerns about the current market disruption, called Baldt and informed him that she wanted to sell some of her holdings in the Fund and was advised by Baldt to "go the full route," a coded signal that she should liquidate all of her holdings in the Fund. Baldt also recommended to Julia that Kingsbury should also liquidate her holdings.
The ALJ also found that Baldt's recommendations to his daughter and ex-wife to sell their holdings, breached his fiduciary duty to Schroder by tipping and committing insider trading by "misappropriat[ing] confidential information for securities trading purposes, in a breach of a duty owed to the source of the information." Baldt's recommendations to his daughter that she should sell her position ran counter to the best interests of the Short-Term Fund. Baldt was aware of the illiquid market, difficulty selling bonds at reasonable prices, and the directive from management to raise cash levels. By recommending that his family sell close to $2 million worth of shares, the ALJ stated that Baldt exacerbated those difficulties faced by the Fund and was contrary to both management's directive and the best interests of the Short-Term Fund.
The ALJ ordered Baldt to cease and desist from committing or causing any violations or future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Advisers Act. The order also barred Baldt from association with an investment adviser and disgorged $9,403.35 in ill-gotten gains.
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