Tuesday, April 23, 2013

SEC Charges Former Medical Device Company Employee for Illegally Tipping Brother with Quarterly Earnings Data

The SEC charged a former employee at a California-based medical device manufacturer with illegally tipping confidential financial data to her brother, who illegally traded in the company's stock and enabled his hedge fund clients to do the same.

The SEC alleges that the former employee, who worked in the finance department at Abaxis Inc., regularly provided material nonpublic information to her brother, whose insider trading in advance of the company's quarterly earnings announcements generated $144,910 in illicit profits. The brother, who was charged by the SEC last year, also passed confidential information to clients of his equity research firm Insight Research, including hedge fund managers.

To settle the SEC's charges, the former employee has agreed to pay $144,910 and be barred from serving as an officer or director of a public company for five years.

"When corporate insiders leak confidential information to a select few, the integrity of our markets is undermined," said Sanjay Wadhwa, Senior Associate Director of the SEC's New York Regional Office. "Abaxis entrusted [the former employee] with market-moving information, and she violated that trust to financially benefit her family."

The SEC's charges stem from its ongoing investigations into expert networks that have uncovered widespread insider trading at several hedge funds and other investment advisory firms. The investigations have so far resulted in enforcement actions against 40 entities or individuals who have reaped more than $430 million in alleged insider trading gains.

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