Securities Law Prof Blog

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

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Sunday, October 23, 2011

SEC Sues Hedge Fund Manager in Insider Trading Case

The SEC announced additional charges in its insider trading case against Denver-based traders who traded on confidential information in the securities of Mariner Energy Inc. ahead of the oil and gas company’s $3.9 billion takeover by Apache Corporation in April 2010. In its initial complaint filed on Aug. 5, 2011, the SEC alleged that Mariner Energy board member H. Clayton Peterson tipped his son with confidential details about Mariner Energy’s upcoming acquisition. Drew Clayton Peterson, who was a managing director at a Denver-based investment adviser, then used the inside information to purchase Mariner Energy stock for himself and others.

An amended complaint filed today adds two more defendants to the case – money manager Drew K. Brownstein who is a longtime friend of Drew Peterson, and the hedge fund advisory firm he controls, Big 5 Asset Management LLC. The SEC alleges that Brownstein traded Mariner Energy securities on the basis of inside information he received from Drew Peterson and reaped illicit profits of more than $5 million combined in his own account, the accounts of his relatives, and the accounts of two hedge funds managed by Big 5.

According to the SEC, “This case is further evidence of the pervasive nature of insider trading by hedge funds, and a sobering reminder that such conduct is not limited to the immediate vicinity of Wall Street but is taking place in cities around the country.”

http://lawprofessors.typepad.com/securities/2011/10/sec-sues-hedge-fund-manager-in-insider-trading-case.html

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