Trading Market Fraud: John Timothy Rice

John Timothy Rice allegedly violated FINRA Rules 5270 and 2010 by sharing material non-public information about imminent customer block order transactions with two firm customers and then executing orders for those customers in the same securities before the block transactions were completed. According to FINRA, this conduct resulted in improper trading advantages and financial harm to other institutional customers.

Rice began his securities industry career in 1965 and was most recently registered as a General Securities Representative and in other capacities with Rice, Voelker, LLC from 1996 until January 2024. His registration ended when the firm terminated him while he was under internal review for sharing block trading information. Rice remains a part owner of the firm but is no longer registered with a FINRA member firm, although he remains subject to FINRA’s jurisdiction.

FINRA Rule 5270 prohibits brokers from executing trades when they possess material, non-public market information about an imminent block transaction. In equity markets, a block transaction typically involves 10,000 shares or more, and such information is considered public only after the transaction is fully executed and reported. This rule exists to prevent trading that could disadvantage other market participants. For example, a broker cannot tip a favored client about a large pending sell order so the client can sell their shares first, nor can they use inside knowledge of a large buy order to purchase shares ahead of it for personal gain.

According to FINRA, from February 2018 through November 2023, Rice provided advance notice of 111 imminent block trades to two institutional customers. Those customers then traded in the same securities before the block orders were completed, earning Rice $127,549 in commissions. In 35 of these instances, trades executed by the tipped customers caused approximately $71,000 in adverse price impact to eleven institutional customers placing the block orders. The firm reimbursed the affected customers during FINRA’s investigation.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.