Summary: Securities Expert Witness Not Allowed to Testify in broker-dealer case.
Facts: This case (Securities and Exchange Commission v. Lek Securities Corporation et al – United States District Court – April 8th, 2019) involves securities. The plaintiff sued the defendant alleging that traders engaged in two schemes to manipulate the securities markets and that they did so through trading at a broker-dealer based in New York. The plaintiff brought claims for violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Securities Act of 1933 (the “Securities Act”). The defendants have hired Securities Expert Witness Roger Begelman to provide testimony. The plaintiff has filed a motion to exclude this expert from testifying.
Discussion: Begelman’s report purports to evaluate the defendants compliance and surveillance practices in light of industry standards. The plaintiff argues that Begelman is not qualified to provide the expert opinions in his report. The plaintiff also alleges that Begelman’s report provides only a narrative of the defendant’s compliance practices and that it is not helpful to the jury. The court opines that it agrees with the plaintiff and grants the motion to exclude.
First, the court notes that Begelman is not qualified to opine about the adequacy of a broker-dealer’s systems and procedures to detect manipulative layering. The court further opines that Begelman does not have relevant experience at a broker-dealer. In addition, he admitted that he has no experience related to the detection or surveillance of layering the equities markets. The court also states that none of the jobs in which he was previously employed have provided Begelman with experience on the systems used by broker-dealers to detect and prevent manipulative layering schemes in the equities markets.
Also, Begelman did not perform any research into how broker’dealers provide surveillance for market manipulation before concluding that the defendant’s layering controls were consistent with the industry standard. The court opines that he compiled no data, did not contact any broker-dealers, nor did he develop an adequate understanding of the defendant’s layering controls prior to rendering his opinion. In addition, the court opines that Begelman’s report is not grounded in data or statistics, is not supported by citations to peer-reviewed literature, and is not based on a comparative study of other broker-dealers’ compliance practices.
Last, the court opines that the center of Begelman’s report is little more than a narrative of the defendant’s communications with regulators and its adjustments to the Q6 Layering Control system.
Conclusion: The motion to exclude the expert witness testimony of Roger Begelman is granted.