Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, April 17, 2008

SEC Files Complaint Against Former Fidelity Trader for Misappropriating Confidential Information

The SEC filed a civil action in the U.S. District Court in Boston against David K. Donovan, Jr. ("Donovan"), a former equity trader at Fidelity Investments, and David R. Hinkle ("Hinkle"), a former broker at Capital Institutional Services, Inc. ("Capital Institutional Services"), for defrauding Fidelity and its advisory clients. The complaint alleges that, between July and September 2003, the defendants defrauded Fidelity and its advisory clients by gaining access to confidential trading information stored on Fidelity's internal order database, by learning that Fidelity's advisory clients, including the Fidelity mutual funds, were purchasing and intended to continue purchasing a substantial amount of the common stock of Covad Communications Group, Inc. ("Covad"), by using that confidential information concerning Fidelity's pending securities orders to trade on and ahead of Fidelity's securities orders for the stock of Covad, by failing to disclose to Fidelity and its clients that they were trading on and ahead of those orders, and by profiting thereby.

The SEC alleges that Donovan and Hinkle violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties

http://lawprofessors.typepad.com/securities/2008/04/sec-files-com-2.html

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