Friday, August 22, 2014

SEC Charges Former Bank Executive and Friend With Insider Trading Ahead of Acquisition

The SEC charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank’s acquisition of another financial institution.
The SEC alleges that the former executive, then a senior vice president at Eastern Bank, learned through his job responsibilities that his employer was planning to acquire Wainwright Bank & Trust Company.  He tipped his friend, a fellow golfer with whom he socialized at a local country club.  In the two weeks preceding a public announcement about the planned acquisition, the friend sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities.  He had never previously purchased Wainwright stock.  After the public announcement of the acquisition caused Wainwright’s stock price to increase nearly 100 percent, the friend sold all of his shares during the next few months for nearly $300,000 in illicit profits.

According to the SEC’s complaint filed in federal court in Boston, regulators began requesting information from Eastern Bank and others about trading in Wainwright stock a few months after the trades occurred, and the former executive quit his job at Eastern Bank rather than respond to such inquiries.  The two men each were subpoenaed to testify in the SEC’s investigation but asserted their Fifth Amendment privileges against self-incrimination for every question asked of them, including whether they know one another.
For more information, click here.
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