- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
The SEC charged six individuals with insider trading involving the securities of two companies.
In a Complaint filed in the U.S. District Court for the Northern District of California, the SEC alleged that the individuals collectively engaged in an insider trading ring involving two separate schemes. In the first, the SEC alleged, one of the individuals repeatedly shared unannounced quarterly earnings information from his employer with his friend, who traded on the information and tipped others to it in the ring. In the second, the SEC alleged, another one of the individuals tipped material nonpublic information about his employer to three of the other individuals, who traded on the information ahead of the company's public earning announcement.
As a result, the Complaint alleges, the individuals violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 ("Employment of Manipulative and Deceptive Devices") thereunder.
The SEC sought (i) permanent injunctions and (ii) civil monetary penalties. Four of the individuals have agreed to settle the case and pay civil monetary penalties in the amounts of $281,497, $128,230, $65,780, and $178,320, and one individual agreed to settle the case and have the court decide the amount of any civil penalty. The settlements are subject to Court approval. The litigation against one of the individuals is ongoing.
The U.S. Attorney's Office for the Northern District of California also announced criminal charges against three of the individuals.
Commentary
This case stands out for the interesting facts - it is worth reading the facts section of the Complaint - and because the SEC discovered the trading through its use of data analysis, rather than from a tip or referral. The SEC continues to increase its capabilities to monitor for suspicious trading through data analytics, which has enabled it to bring enforcement actions for illegal insider trading that otherwise would likely have gone undetected.
Primary Sources
- SEC Press Release: Six Charged in Silicon Valley Insider Trading Ring
- SEC Complaint: Nathaniel Brown, Benjamin Wylam, Naveen Sood, Marcus Bannon, Matthew Rauch and Naresh Ramaiya
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