Securities Law Prof Blog

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

Friday, March 15, 2013

Hedge Fund Sigma Capital Agrees to Settle Insider Trading Charges Involving Expert Networks

The SEC announced another settlement today stemming from its investigation of expert networks and insider trading.  Hedge fund advisory firm Sigma Capital Management has agreed to pay nearly $14 million to settle charges that the firm engaged in insider trading based on nonpublic information obtained through one of its analysts about the quarterly earnings of Dell and Nvidia Corporation.  Jon Horvath, a former analyst at Sigma Capital, previously agreed to a settlement in which he admitted liability.  In addition, the SEC named two affiliated hedge funds – Sigma Capital Associates and S.A.C. Select Fund – as relief defendants that unjustly benefited from Sigma Capital’s violations. S.A.C. Select Fund is an affiliate of S.A.C. Capital.

The SEC’s complaint alleges that Horvath provided Sigma Capital portfolio managers with nonpublic details about quarterly earnings at Dell and Nvidia after he learned them through a group of hedge fund analysts with whom he regularly communicated. Based on the confidential information, Sigma Capital traded Dell and Nvidia securities in advance of earnings announcements in 2008 and 2009 for $6.425 million in gains for its hedge fund affiliates.

Sigma Capital agreed to pay disgorgement of $6.425 million plus prejudgment interest of $1,094,161.92 and a penalty of $6.425 million.

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