Tuesday, March 1, 2005

Executive Settles Insider Trading Charges Related to Exercising Stock Options

The temptation to exercise your stock options and sell the shares when you know that your company is about to announce negative news proved too strong for John D. Hutchinson, an executive with Ryland Group, Inc.  The SEC filed a complaint in federal court in Los Angeles charging Hutchinson with insider trading related to the following conduct outlined in the Commission's Litigation Release:

The Commission's complaint alleges that during December 2003, Hutchinson, in the course of his duties as a division president of Ryland, became aware that Ryland's new housing orders for the fourth quarter of 2003 would decrease significantly compared to the fourth quarter of 2002. The complaint alleges that while Hutchinson was aware of this non-public information, he exercised all of his exercisable options in Ryland stock, and sold the underlying shares before this information was publicly announced, thereby avoiding a substantial loss of over $100,000.

Hutchinson disgorged the loss avoided from the trade and paid a one-time civil money penalty in settling the case.  The siren song of inside information can be so hard to resist. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/03/executive_settl.html

Civil Enforcement, Securities | Permalink

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