Securities Law Prof Blog

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

Tuesday, July 21, 2009

Perry Corp. Settles SEC Charges for Failure to Disclose Stock Purchases

The SEC settled charges that New York-based investment adviser Perry Corp. violated securities laws by failing to report that it had purchased substantial stock in a public company in order to vote them in favor of a merger from which Perry stood to profit.  Perry agreed to pay a $150,000 penalty to settle the SEC's charges without admitting or denying the Commission's findings.

According to the SEC, the firm failed to disclose that it had acquired nearly 10 percent of the common stock of Mylan Laboratories, Inc. At the time, Mylan had announced a proposed acquisition of King Pharmaceuticals, Inc. that was subject to shareholder approval. Perry had entered into an investment strategy known as "merger arbitrage" and would profit from a Mylan-King merger. To increase the likelihood of the merger, Perry separately purchased the Mylan voting shares and entered into a series of "swap" transactions — hedging transactions through the use of derivative instruments — designed to avoid any financial exposure from its ownership of those shares. The securities laws require institutional investors like Perry to report the acquisition and ownership of more than 5 percent of the common stock of a public company.

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