The SEC filed a Complaint in the United States District Court for the Southern District of New York against a former executive of a multinational manufacturing company, Nordson Corporation, for making illegal trades using material non-public information ("MNPI").
According to the Complaint, the former vice president of the company's Asia Pacific Group in Shanghai, China, learned that the company's business division outperformed market predictions for the first three quarters of 2016. The SEC alleged that the former vice president used this MNPI to (i) purchase approximately $1 million worth of company options contracts before the company released its quarterly earnings statements, and then (ii) sell the options contracts immediately after the quarterly earnings statements were released and the stock price rose significantly. As a result, the SEC claims that the former executive made $850,000 in illegal trading profits.
The SEC is seeking (i) a permanent injunction, (ii) disgorgement of ill-gotten gains, including prejudgment interest, and (iii) a civil penalty.
Commentary Steven Lofchie
The SEC has technology. A large purchase of listed options just before a significant market move will not go under the radar.
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