A group that made profits of $4.8 million has been charged with insider dealingNEW YORK - The US Securities and Exchange Commission (SEC) has charged seven individuals and two companies involved in an insider-trading ring. Matthew Devlin, a former registered representative at Lehman Brothers in New York, is alleged to have traded on, and tipped his clients and friends with, confidential, non-public information about 13 impending corporate transactions. Some of Devlin's clients and friends, three of whom worked in the securities or legal professions, tipped others who also traded in the securities of the companies involved in the transactions.
According to the SEC's complaint, Devlin got the inside information from his wife, a partner in the New York City office of an international public relations firm working on the deals. Because the inside information was valuable, some of the traders referred to Devlin and his wife as the 'golden goose'. The SEC's complaint further alleges Devlin was rewarded with cash and luxury items for providing inside information, including a widescreen TV, a leather jacket and Porsche driving lessons.
The SEC alleges the illicit trading occurred from at least March 2004 through to July 2008, and yielded more than $4.8 million in profits. Related criminal charges by the US Attorney's Office for the Southern District of New York have also been unsealed against some of the defendants named in the SEC's complaint.
"The Commission is unwavering in its determination to pursue illegal insider trading by securities professionals, lawyers, and others," says Linda Chatman Thomsen, director of the SEC's enforcement division. "Today's enforcement action is another example of the exemplary working relationships among the SEC, criminal authorities, Finra [the Financial Industry Regulatory Authority] and other self-regulatory organisations."
Antonia Chion, associate director of the SEC's enforcement division, adds: "As alleged in our complaint, many of the defendants took steps to evade detection. This case demonstrates the SEC's ongoing commitment to pursuing sophisticated insider-trading schemes."
Although many of the defendants had accounts with Lehman, says the SEC, they often attempted to avoid detection by trading in the securities of the target companies in numerous accounts that were not associated with Lehman or Devlin. To further conceal their illicit trading, at least two of the defendants sold off some of the shares they had purchased based on inside information prior to public announcements of the deals. Devlin and one of his tippees also arranged to buy shares on Devlin's behalf so that he could profit from the non-public information but evade scrutiny. When this accomplice's name appeared on a watch list, Devlin agreed with him to stop providing the inside information.
The other defendants include business partners, clients and friends of Devlin. Four of the men allegedly involved in the ring - traders Jamil Bouchareb and Daniel Corbin, tax lawyer Eric Holzer and Frederick Bowers, a Lehman broker - have been arrested by the FBI and charged with conspiracy and securities fraud.
Click here for the SEC complaint.
More on Regulation
2015 rules promise oversight increase
Recent Iosco consultation paper aims to better co-ordinate global regulation
Indian regulators to allow overseas firms to access market but speculation ruled out
Market anticipates an impending regulatory mandate for rupee rates clearing
Sign up for Risk.net email alerts
Oxford professor David Vines argues that the carrot is as important as the stick
Sponsored webinar: IBM
Watch highlights of this year's London conference
Operational risk and the challenges of defining and dealing with conduct risk
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.