Articles Tagged with Insider Trading

Last month at the Annual Conference of the Securities and Exchange Commission (“SEC”), the Commission revealed its enforcement statistics for 2014, including a record number of enforcement actions (755) and monetary relief obtained ($4.1 Million). The Commission also announced its current initiatives including a continued emphasis in the use of data analytics in both regulation and enforcement investigations. Among the areas of emphasis highlighted at this year’s conference were insider trading, financial reporting and auditing cases, inadequate internal controls for public companies, enhanced scrutiny of auditors and other reporting gatekeepers, and Foreign Corrupt Practices Act enforcement.

In addition, 30 trials were conducted in 2014 by the Commission, the most trials in over a decade. By contrast, the Commission tried only 6 cases in 2013. Two-thirds of the trials were in federal court, while one-third were before Administrative Law Judges.
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In a case that underscores the importance of maintaining thorough and contemporaneous records of compliance reviews of trading records of firm personnel for both broker-dealers and registered investment advisers, on October 15th, 2014, the Securities and Exchange Commission’s Enforcement Division instituted an administrative proceeding against a former compliance officer at Wells Fargo Advisors for allegedly altering documents requested by the SEC during an insider trading investigation.

The Wells Fargo Advisors’ compliance officer was responsible for identifying suspicious trades by Wells Fargo personnel and determining, after a thorough analysis, or what was called a “look back review,” whether such trading was based on material non-public information. On September 2nd, 2010, the compliance officer began review on a set of trades in Burger King securities made by a registered representative of Wells Fargo Advisors, prior to an announcement that the private equity firm, 3G Capital Partners Ltd. (“3G Capital”), was to acquire Burger King at take it private. The findings contained within the compliance officer’s review confirmed that the registered representative and his customers bought Burger King securities ten days prior to the announcement. However, the compliance officer failed to make any additional inquiries into the trades and closed the review with “no findings.” The registered representative was later criminally charged in September of 2012, and subsequently was convicted of trading in Burger King securities on the basis of material non-public information.
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The Securities and Exchange Commission (SEC) has filed a proposed settlement, subject to court approval, for insider trading violations against seven fund managers and analysts along with two multi-billion dollar hedge fund advisory firms, Diamondback Capital Management LLC and Level Global Investors LP. According to the SEC, individuals with both firms received nonpublic, material information about Dell Inc. and Nvidia Corp. The cases charge illicit gains exceeding $62.3 million for the Dell trades and $15.7 million for the Nvidia trades.

The seven individuals named in the SEC complaint are Sandeep Goyal, Jesse Tortora, Todd Newman, Spyridon Adondakis, Anthony Chiasson, Jon Horvath and Danny Kuo. Goyal is charged with obtaining quarterly earnings information from an insider at Dell and telling Diamondback Analyst Tortora, who in turn tipped his portfolio manager Newman. Tortora also allegedly tipped three other people: Horvath, Kuo, and Adonakis, an analyst at Level Global who tipped his manager, Chiasson. In turn, Kuo allegedly obtained nonpublic, material information about Nvidia and tipped Tortora and Adondakis. SEC Enforcement Division Director Robert Khuzami said, “These are not low-level employees succumbing to temptation by seizing a chance opportunity. These are sophisticated players who built a corrupt network to systematically and methodically obtain and exploit illegal inside information again and again at the expense of law-abiding investors and the integrity of the markets.”
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