Thursday, November 29, 2012
The SEC charged two retail brokers who formerly worked at a Connecticut-based broker-dealer with insider trading on nonpublic information ahead of IBM Corporation’s acquisition of SPSS Inc. According to the SEC's complaint, Thomas C. Conradt learned confidential details about the merger from his roommate, a research analyst who got the information from an attorney working on the transaction who discussed it in confidence. Conradt purchased SPSS securities and subsequently tipped his friend and fellow broker David J. Weishaus, who also traded. The insider trading yielded more than $1 million in illicit profits. The SEC’s investigation uncovered instant messages between Conradt and Weishaus where they openly discussed their illegal activity. The SEC’s investigation is continuing.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Conradt and Weishaus, who live in Denver and Baltimore respectively.
The SEC alleges that the research analyst’s attorney friend sought moral support, reassurance, and advice when he privately told the research analyst about his new assignment at work on the SPSS acquisition by IBM. In describing the magnitude of the assignment, the lawyer disclosed material, nonpublic information about the proposed transaction, including the anticipated transaction price and the identities of the acquiring and target companies. The associate expected the research analyst to maintain this information in confidence and refrain from trading on this information or disclosing it to others.
The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, and a permanent injunction against the brokers.