Oregon-Based Expert Consulting Firm and Owner Charged by SEC with Insider Trading in Technology Sector

Portland, Oregon-based expert consulting firm Broadband Research Corporation and owner have been charged with insider trading. The charges stem from the SEC’s ongoing investigation of insider trading involving expert networks. It is alleged they claimed to be in the business of providing clients with legitimate research about publicly-traded technology companies, but instead typically tipped clients with material nonpublic information that the owner obtained from prohibited sources inside the companies. This owner has also been arrested and charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and two counts of securities fraud.

SEC Charges Oregon-Based Expert Consulting Firm and Owner with Insider Trading in Technology Sector

SEC Tightens Rules on Advisory Performance Fee Charges

The SEC is tightening its rule on investment advisory performance fees to raise the net worth requirement for investors who pay performance fees, by excluding the value of the investor’s home from the net worth calculation. As a result, registered investment advisers may charge clients performance fees if the client’s net worth or assets under management by the adviser meet certain dollar thresholds. Those who do are deemed to be “qualified clients,” able to bear the risks associated with performance fee arrangements. The revised rule will require “qualified clients” to have at least $1 million of assets under management with the adviser, up from $750,000, or a net worth of at least $2 million, up from $1.5 million. These rule changes conform the rule’s dollar thresholds to the levels set by a Commission order in July 2011.

SEC Tightens Rules on Advisory Performance Fee Charges

California Hedge Fund Manager Connected to Galleon Insider Trading Case

A hedge fund manager and his Menlo Park, Calif.-based firm have been charged by the SEC for their involvement in the insider trading ring connected to Raj Rajaratnam and hedge fund advisory firm Galleon Management. The pair illegally traded based on material nonpublic information obtained from the hedge fund manager's associate, who was his friend and neighbor. The firm reaped nearly $1 million in ill-gotten gains by trading on Khan's illegal tips.

Sanjay Wadhwa, Associate Director of the SEC's New York Regional Office and Deputy Chief of the Market Abuse Unit, added, "This action should send a strong signal that the SEC will continue to pursue every angle of the Galleon investigation to hold accountable those who have undermined the integrity of our markets by engaging in illegal insider trading."

California Hedge Fund Manager Connected to Galleon Insider Trading Case

Former Pharmaceutical Company Employee Charged with Insider Trading on Biotech Deals

A former employee of Takeda Pharmaceuticals International, Inc. has been charged after trading on inside information about the Japanese firm’s business alliances and corporate acquisitions. The employee reaped more than $63,000 of profits, achieving a 169% rate of return, by trading on non-public information about two business transactions in 2008.

He joined Takeda in January 2008 as a Director in its business development group and soon after began to misuse confidential corporate information for his personal benefit. In February 2008, he began placing trades in his personal brokerage account based on non-public information about Takeda’s proposed strategic alliance with Cell Genesys, which was announced in March. Then in March 2008, he made additional trades for his own account based on non-public information about Takeda’s plan to acquire Millennium, which was announced in April. He also traded on other confidential information in 2009 and 2010, purchasing call options in the securities of Arena Pharmaceutical, Inc., and AMAG Pharmaceutical, Inc., respectively, when the firms were engaged in confidential discussions on business transactions with Takeda. The employee, who was promoted to Senior Director of Takeda’s business development group in September 2010, resigned in May 2011.

“[He] was entrusted with highly confidential information of Takeda and betrayed that trust to line his own pocket,” said George S. Canellos, Director of the SEC’s New York Regional Office. “His is another cautionary tale of an employee who succumbed to greed and the delusion that he wouldn’t get caught.”

The employee has agreed to pay more than $136,000 to settle the SEC’s charges.

Former Pharmaceutical Company Employee Charged with Insider Trading on Biotech Deals

Smith & Nephew PLC with Foreign Bribery

London-based medical device company Smith & Nephew PLC has been charged with violating the Foreign Corrupt Practices Act (FCPA) as a result of its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business. It is alleged that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it seemed as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.


Smith & Nephew PLC with Foreign Bribery

SEC Charges Former Credit Suisse Investment Bankers in Subprime Bond Pricing Scheme During Credit Crisis

Four former veteran investment bankers and traders have been charged for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.Credit Suisse's former global head of structured credit trading and head of hedge trading, joined by two mortgage bond traders, ignored the market's sharp decline in the price of subprime bonds. They continued to price them so that Credit Suisse would achieve fictional profits. It is alleged that the mispricing scheme was driven in part by the investment bankers’ desire for lavish year-end bonuses and, in the case of one, a promotion into the senior-most echelon of Credit Suisse’s investment banking unit.

SEC Charges Former Credit Suisse Investment Bankers in Subprime Bond Pricing Scheme During Credit Crisis

SEC Charges Brothers With Short Selling Violations

Two brothers living in Chicago and New York were charged by the SEC with naked short selling for failing to locate and deliver shares involved in short sales to broker-dealers. The brothers generated more than $17 million in ill-gotten gains from naked short selling transactions involving such stocks as Chipotle Mexican Grill Inc., Fairfax Financial Holdings Ltd., Novastar Financial Inc., and NYSE Group. As one of the brothers stated in a recorded telephone conversation, “What I sell them is not guaranteed, it never gets delivered, it’s funny paper.”

SEC Charges Brothers With Short Selling Violations

SEC Charges Former Executives and Accountants With Fraud at British Subsidiary of Medical Devices Company

Four former senior executives and accountants at the British subsidiary of an Indiana-based manufacturer of medical devices and aerospace products were charged by the SEC for their roles in an accounting fraud that was so pervasive that it distorted the financial statements of the parent company. The SEC also reached settlements with the company’s former CEO and current CFO, who were not involved or aware of the scheme at the subsidiary.

SEC Charges Former Executives and Accountants With Fraud at British Subsidiary of Medical Devices Company

Citigroup Ordered to Pay $500,000 in Age Bias Case

Citigroup Global Markets has been ordered to pay $500,000 to a former branch manager who alleged the company fired him because of his age. The arbitration award against the firm found that the firm violated Florida's civil rights statute in 2008 when it terminated the branch manager.

Age discrimination cases are extremely difficult to prove in FINRA arbitrations, given the limited amount of discovery, and the reluctance of arbitration panels to order discovery regarding terminations and human resources issues. I was therefore eager to learn what it was that caused this particular panel to award a half a million dollars in damages.

The FINRA panel did not explain its reasons for the decision, but according to an article in Reuters, the branch office manager began to hear from other branch managers who told him they were being "forced" back into broker positions and replaced with younger employees. His manager made frequent remarks about age. For example, he said that the manager was "getting kind of long in the tooth" for the job, and "When you reach your age, you should think of retirement and not working," according to the Reuter's article. The article also claims that the manager then engaged in a series of actions against branch manager, including giving him a "final warning" for alleged employee complaints and reducing his bonus by 3 percent as a penalty for an alleged customer complaint, according to the document. The branch manager was eventually "offered" a position as a broker while on family leave after his sister died. Citigroup replaced him with a 42-year-old manager, according to the article.


Citigroup unit to pay $500,000 in age bias case - Yahoo! News

Diamondback Capital Agrees to Settle SEC Insider Trading Charges

The SEC announced that Diamondback Capital Management LLC has agreed to pay more than $9 million ($6 million of allegedly ill-gotten gains and $3 million civil penalty) to settle insider-trading charges brought by the Commission on Jan. 18. As part of the proposed settlement, the Stamford, Conn.-based hedge fund adviser also has submitted a statement of facts to the SEC and federal prosecutors, and entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York. The proposed settlement would resolve charges of insider trading by Diamondback in shares of Dell Inc. and Nvidia Corp. in 2008 and 2009.

“We are pleased to have reached a prompt resolution of the charges against Diamondback,” said George S. Canellos, Director of the SEC’s New York Regional Office. “If approved by the court, we believe that the proposed settlement appropriately sanctions the misconduct while giving due credit to Diamondback for its substantial assistance in the government’s investigation and the pending actions against former employees and their co-defendants.”

Diamondback Capital Agrees to Settle SEC Insider Trading Charges