Securities Law Prof Blog

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

Friday, January 28, 2011

SEC Charges Former Galleon Portfolio Manager with Insider Trading

On January 26, 2011, the SEC filed a civil injunctive action in the United States District Court for the Southern District of New York alleging that Adam Smith — a former portfolio manager of the Galleon Emerging Technology funds (f/k/a the Galleon Communications funds) engaged in insider trading in the securities of ATI Technologies, Inc. The SEC alleges that Smith caused the Galleon funds he advised to purchase shares of ATI based on material non-public information concerning Advanced Micro Devices Inc.’s $5.4 billion takeover of ATI in July, 2006. The trading generated over $1.3 million in illicit profits.

According to the SEC’s complaint, Smith obtained material non-public information concerning the AMD/ATI transaction from an investment banking source that Smith had known for years. This source, according to the SEC, provided Smith with the tip in order to win favors from Galleon such as securing investment banking work from, or obtaining future employment with, Galleon. The complaint filed today relates to a pending enforcement action, SEC v. Galleon Management, LP, et al., 09-CV-8811 (S.D.N.Y.) (JSR).

The SEC has now charged 28 defendants in its Galleon-related enforcement actions which have alleged widespread and repeated insider trading at numerous hedge funds including Galleon — a multi-billion dollar New York hedge fund complex founded and controlled by Raj Rajaratnam — and by other professional traders and corporate insiders in the securities of 14 companies generating illicit profits totaling over $70 million.

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The enforcement action against Adam Smith was done purely for symbolic purposes.

Posted by: Invisible Hands | Jan 28, 2011 9:04:51 AM

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