Category: Insider Trading


SEC’s Broken Window Enforcement Program Gets a Boost from “Quantitative Analytics” and “Algorithms”

Posted on September 17th, by , and in Form 4, Insider Trading, Strict Liability. Comments Off on SEC’s Broken Window Enforcement Program Gets a Boost from “Quantitative Analytics” and “Algorithms”

The SEC announced last week that it had charged, in settled administrative proceedings, 28 individuals and investment firms that failed to “promptly report information about their holdings and transactions in company stock” and six public companies that contributed to “filing failures by insiders or fail[ed] to report their insiders’ filing delinquencies.” See SEC Press Release: “SEC Announces Charges Against Corporate Insiders for Violating Laws Requiring Prompt Reporting of Transactions and Holdings.” The SEC obtained a total of $2.6 million in civil monetary penalties as a result of the filed charges. The individual amounts ranged from $25,000 to $150,000. These cases are the latest example of the SEC’s focus on strict liability violations of the federal securities laws.

All of the charges arise under Sections 13(d), 13(g), and 16(a) of the Securities Exchange Act of 1934. These sections require certain forms to … Read More »


SEC Gives Insider Trader a $30,000 Slap On The Wrist

Posted on May 16th, by and in Insider Trading, Settlements. Comments Off on SEC Gives Insider Trader a $30,000 Slap On The Wrist

On April 23, 2014, the SEC agreed to settle insider trading charges against Chris Choi, a former accounting manager at Nvidia Corporation who allegedly set into motion a trading scheme that reaped nearly $16.5 million in illicit profits and avoided losses. Given the amount of the purported loss, the fact that Choi was the original “tipper,” and the fact that nearly every other member of the scheme has been indicted, the Choi settlement seems like nothing more than a slap on the wrist: a $30,000 penalty without admitting to the insider trading allegations. The Choi settlement also represents a notable departure from the SEC’s recent insider trading fines and penalties against “tippers.”

According to the SEC’s complaint, on at least three occasions during 2009 and 2010, Choi tipped material nonpublic information about Nvidia’s quarterly earnings to his friend Hyung Lim. SEC … Read More »


SEC Enters Into First NPA With An Individual

Posted on May 13th, by and in Cooperation, Deferred Prosecution Agreements, Insider Trading, Non-prosecution Agreements. Comments Off on SEC Enters Into First NPA With An Individual

In 2010, the SEC implemented a Cooperation Initiative designed to encourage individuals and companies to cooperate with SEC investigations. See SEC Announces Initiative to Encourage Individuals and Companies to Cooperate and Assist in Investigations, SEC Press Release No. 2010-6 (Jan. 13, 2010). Although the Division of Enforcement authorized SEC staff to “use various tools to encourage individuals and companies to report violations and provide assistance to the agency,” including cooperation agreements, deferred prosecution agreements (“DPA”), and non-prosecution agreements (“NPA”), the staff has made limited use of the cooperation tools with individuals.

In fact, in April, the SEC announced its first NPA with an individual in connection with an insider trading case involving GSI Commerce Inc.’s (“GSIC”) merger with eBay. See SEC v. Saridakis,Civil Action No. 14-2397 (E.D. Pa.). According to the SEC, prior to GSIC’s public announcement of its merger with … Read More »


SEC’s “Neither Admit nor Deny” Settlements Continue to Draw Controversy

Posted on May 12th, by and in Admissions, Insider Trading, Neither Admit Nor Deny, Settlements. Comments Off on SEC’s “Neither Admit nor Deny” Settlements Continue to Draw Controversy

Recently, Judge Harold Baer of the U.S. District Court for the Southern District of New York reluctantly approved the SEC’s “neither admit nor deny” insider trading settlement with Ronald Dennis, a former analyst with CR Intrinsic Investors, a hedge fund affiliated with S.A.C. Capital Advisors. See SEC v. Dennis, No. 14 Civ. 1746 (S.D.N.Y. Apr. 22, 2014). To settle the SEC’s charges, Dennis agreed, without admitting or denying the allegations regarding his misconduct, to a permanent bar from the securities industry and to pay $95,351 in disgorgement, $12,632 in prejudgment interest, and a civil penalty of $95,351. Notably, Dennis was not charged criminally.

In its recently filed complaint against Dennis, the SEC alleged that Dennis participated in the now-infamous insider trading scheme involving Dell securities. More specifically, the SEC alleged that from 2008 through 2009, an unnamed Dell insider provided material … Read More »


An Upside to Parallel Civil and Criminal Investigations? Criminal Authorities May Have to Disclose Exculpatory Information in the Possession of the Civil Agency

Posted on March 24th, by and in Brady Material, Insider Trading, Joint Investigations, Parallel Investigations. Comments Off on An Upside to Parallel Civil and Criminal Investigations? Criminal Authorities May Have to Disclose Exculpatory Information in the Possession of the Civil Agency

Good facts make good lawyers, but good lawyers need to know where to go to get those facts. More and more frequently, the staff of the Division of Enforcement of the SEC is conducting investigations in coordination with U.S. Attorney’s Offices. The close relationship offers mutual benefits. The SEC brings the subject matter expertise; the USAOs have “tools” that the SEC does not have—e.g., the ability to conduct “covert” operations and to use wire taps. Certainly, the Galleon line of insider trading cases demonstrates the results of the close working relationship.

USAOs are quickly learning, however, that there are certain heightened obligations that accompany parallel investigations. In a criminal proceeding, due process requires that prosecutors produce all material information that is favorable to the defendant. Civil regulatory agencies such as the SEC, however, do not usually have a specific duty to … Read More »


SEC v. Jacobs May Signal Limit to Duty of Trust or Confidence Required to Prove Insider Trading Based on Misappropriation Theory

Posted on March 20th, by and in Insider Trading, Jury Verdicts, Misappropriation, Relationship of Trust and Confidence. Comments Off on SEC v. Jacobs May Signal Limit to Duty of Trust or Confidence Required to Prove Insider Trading Based on Misappropriation Theory

To prevail on an insider-trading claim pursuant to Section 10(b) of the Exchange Act and Rule 10b-5 thereunder based on the misappropriation theory, the SEC must prove that the defendant (1) misappropriated material, nonpublic information; (2) had a duty of trust or confidence; (3) breached that duty; (4) purchased or sold securities, or tipped another who purchased or sold securities, on the basis of that information; and (5) knew or should have known that he or she was trading or tipping others on inappropriately obtained information. Dirks v. SEC, 463 U.S. 646, 660 (1983). The SEC has identified three nonexhaustive circumstances that create a duty of trust or confidence; they are (1) when a person agrees to maintain information in confidence; (2) when there is a history, pattern, or practice of sharing confidences and the recipient knows or reasonably should know … Read More »




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