Securities Law Prof Blog

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

Tuesday, February 15, 2011

Securities Industry Professionals and Attorney Settle SEC Charges in Wall Street Insider Trading Case

The SEC announced that on February 9, 2011, the United States District Court for the Southern District of New York entered final judgments against defendants Jeffrey Glover, Frederick Bowers, Thomas Faulhaber and Eric Holzer in a case alleging widespread insider trading against nine defendants and three relief defendants. These four defendants are the first to settle the Commission’s pending civil action and have agreed to pay a total of more than $1.3 million in disgorgement, prejudgment interest and civil penalties.

The Commission’s complaint alleges that from at least March 2004 through July 2008, Matthew Devlin, then a registered representative at Lehman Brothers, Inc., traded on and tipped his clients and friends, including individuals in the securities and legal professions, with inside information about 13 impending corporate transactions. As alleged in the complaint, Devlin had misappropriated the inside information from his wife who was employed by a public relations firm working on the deals.

According to the complaint, Glover, an investment adviser and one of Devlin’s clients, traded on Devlin’s tips about five deals. The complaint alleges that Devlin also tipped his trading partner, Bowers, about three upcoming acquisitions. As alleged in the complaint, Bowers then tipped his client, Faulhaber, who was affiliated with a registered broker-dealer. Faulhaber traded in three deals, and kicked back cash to Bowers. The complaint further charges Holzer, Devlin’s friend and a former tax associate in the New York City office of an international law firm, with trading on Devlin’s tips in at least three deals. According to the complaint, Devlin and Holzer also agreed that Holzer would arrange for the purchase of shares for Devlin’s benefit so Devlin could profit from the nonpublic information but evade scrutiny.

Without admitting or denying the allegations in the complaint, Glover, Bowers, Faulhaber and Holzer settled the Commission’s insider trading charges. They agreed to injunctions from violating antifraud provisions, monetary relief and various bars in related administrative proceedings, as described below.

The Commission’s action against the other defendants and relief defendants is ongoing.

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