Wednesday, April 13, 2016

SEC: Research Analyst Is Insider Trading in Mother’s Brokerage Account

The Securities and Exchange Commission today announced insider trading charges against a research analyst who allegedly reaped more than $1.5 million in February through trades he made in his mother’s brokerage account based on nonpublic information he learned at work.

The SEC alleges that John Afriyie found out about an impending acquisition of home security company The ADT Corporation when prospective acquirer Apollo Global Management approached the Manhattan-based investment firm where he was employed and discussed potential debt financing for a public-to-private deal.  Afriyie subsequently accessed several highly confidential, deal-related documents on the firm’s computer network and purchased thousands of high-risk, out-of-the-money ADT call options in his mother’s account in anticipation that ADT’s stock price would rise when the transaction was publicly announced.  The ADT deal was announced on February 16, and afterwards Afriyie sold all of the ADT options in his mother’s account to obtain his illicit profits.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Afriyie. 

“Insider traders should have learned by now that trying to hide their illegal activity in a relative’s account ultimately won’t work,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “On behalf of the millions of traders in our markets who play by the rules, we will continue to detect and expose those who don’t.”

Today’s charges are the latest example of SEC staff thwarting the efforts of insider traders to avoid detection by trading in a relative's brokerage account.  Other cases include:

·         A group of Northern California men allegedly conducted an insider trading scheme in which the primary trader used his brother-in-law’s account to trade on nonpublic tips about Ross Stores leaked by his friend who worked there.

·         A then-employee at Goldman Sachs was charged with insider trading after SEC enforcement staff utilized data analysis tools to detect his unusual trading activity in two different accounts, including one belonging to his father.

·         A New York City investment banker was charged with insider trading in his father’s account as well as an account belonging to the mother of his young child to generate illegal proceeds in lieu of formal child support payments.

·         A Chicago-based accountant was charged with secretly using his wife’s account to illegally trade in advance of financial reporting announcements by the company where he worked.

·         A systems administrator at Green Mountain Coffee allegedly used his mother’s account for insider trading based on confidential data he obtained shortly before the company made its quarterly earnings announcement.

The SEC’s complaint against Afriyie, which was filed in U.S. District Court for the Southern District of New York, charges him with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The complaint also names his mother as a relief defendant for purposes of recovering ill-gotten gains that Afriyie generated by trading in his mother’s name.

The SEC’s continuing investigation is being conducted by Walker Newell and supervised by Jennifer J. Lee of the San Francisco office with assistance from John Rymas of the Market Abuse Unit.  The SEC’s litigation will be led by Mr. Newell and Marc Katz.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the Financial Industry Regulatory Authority, and the Options Regulatory Surveillance Authority.



SEC Press Release

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