SEC fines former Ocwen exec for insider trading before CFPB, PHH news
A former Ocwen Financial executive is settling Securities and Exchange Commission charges that he engaged in insider trading related to his company's dealings with Altisource Portfolio Solutions following a Consumer Financial Protection Bureau enforcement action and its upcoming merger with PHH Corp.
Bryan R. Ziegenfuse, who previously was a vice president of servicing at the mortgage servicer, agreed to pay $128,130 plus interest, double the profits he made from the three transactions. He did not admit or deny wrongdoing.
Ziegenfuse resigned from Ocwen on June 12.
In his role at Ocwen, Ziegenfuse was updated on the status of the merger negotiations between Ocwen and PHH. Between Feb. 9 and Feb. 23, he purchased 200 call options on PHH stock, as well as 4,000 shares of PHH stock in his mother's name, according to a lawsuit filed by the SEC on Sept. 28 in the U.S. District Court for the Eastern District of Pennsylvania.
After the Feb. 27 merger announcement, Ziegenfuse sold the shares and options at a profit of $36,310.
While that was Ziegenfuse's most lucrative transaction, the legal filing describes two other instances where he used insider information to benefit from stock trades. Before Ocwen's settlement with 10 states over its servicing practices became public knowledge on Sept. 28, 2017, Ziegenfuse purchased 6,000 shares of Ocwen stock through his mother's brokerage account.
Once the settlement became known, Ocwen's stock price increased 4% and on Sept. 29, he sold those shares for a $1,430 profit.
In April 2017, Ziegenfuse became aware of a potential CFPB enforcement action against Ocwen. He purchased 40 put options in Altisource Portfolio Solutions stock in his own brokerage account with a $30 strike price. At that time, Altisourc provided various fee-based services to Ocwen, including providing the servicing system of record Ocwen used to manage its loan portfolio. Ocwen was required to replace the Altisource system to settle allegations that its technology stack was ineffective at even the most basic of servicing tasks.
Altisource was originally created as a spinoff company from Ocwen. After the announcement of the CFPB action, Altisource's stock price fell to $25.44 and Ziegenfuse sold the options for a $26,325 profit.
"We have reviewed the complaint filed today against Mr. Ziegenfuse, a former employee of the company," an Ocwen spokesman said in an emailed statement. "If true, these allegations would constitute a clear violation of numerous Ocwen policies, including those prohibiting improper securities trading and breaches of confidentiality."
"Ocwen takes these policies very seriously, and provides mandatory, annual training to all our employees on these topics. Ocwen cooperated fully with the U.S. Securities and Exchange Commission investigation of this former employee."
Earlier on Sept. 28, Ocwen announced it had received clearance to finalize its deal with PHH.