Friday, September 28, 2007

An End-of-the-Year Insider Trading Clearance at the SEC

With the end of the fiscal year nearly upon us, the SEC seems to be clearing its docket of insider trading cases, announcing three new ones on the second to the last day of FY 2007.  Last year, the Commission was criticized for the decrease in enforcement actions, specifically insider trading cases, and it's unlikely that criticism will be leveled again with the increase in the number of such cases filed.  Note when the trading involved in the three cases occurred:

  • A father and son were accused of trading in the shares of Aspen Technology, Inc., Regeneration Technologies, Inc., and Triangle Pharmaceuticals, Inc. in 2001 and 2002 based on information the son obtained while working for Banc of America Securities and passed on to his father.  The father comes with quite a pedigree, having been "a founding member and Director of the Chicago Board of Options Exchange, Director of the American Stock Exchange, a Board member of the Securities Industry Automation Corporation, and a Director of the New York Institute of Finance."  The two defendants settled the matter by agreeing to be jointly and severally liable to disgorge profits of $204,476 plus prejudgment interest of $72,511.48.  The son will pay a one-time civil penalty, while the father agreed to a double penalty.  The SEC Litigation Release is here.
  • A former director and member of the audit committee at NBTY, Inc. is accused of tipping a friend about an impending announcement of an earnings shortfall in the third quarter of 2004.  Based on the information, the friend "sold his entire position of NBTY stock, sold the stock short, purchased put contracts, and sold call contracts through the custodial accounts of his three children," realizing $400,000 in gains and losses avoided.  The SEC complaint is here.
  • A tippee of a vice president of LendingTree, Inc., traded and tipped others before the announcement of a buyout of the company in May 2003.  The defendant realized profits of $14,078 himself, and his tippees made $74,516.  In settling the matter,the defendant agreed to disgorge his profits and pay a $88,594 penalty, equal to the total profits made through his and his tippees trading.  The SEC Litigation Release is here.

Just like the auto companies, the SEC needs to clear the lot for next year's models. (ph)

Civil Enforcement, Insider Trading, Securities | Permalink

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