The Securities and Exchange Commission on Wednesday charged 11 people with illegal insider trading connected with merger announcements at two companies.
The actions are a break from the SEC's recent rash of pursuing enforcement actions regarding Ponzi schemes. And the charges show how the SEC's new leadership, led by Chairman Mary Schapiro, is reasserting itself as a tenacious watchdog, says securities attorney and former regulator Christopher Bebel.
The two cases allege illegal trading on inside information concerning two deals:
•Liberty Mutual Insurance's acquisition of Safeco last year. The SEC says Anthony Perez, a former Goldman Sachs employee with knowledge of the deal, tipped off his brother Ian ahead of time. Ian Perez, in turn, bought and sold call options for a $152,000 profit, the SEC says.
Former Hartford Financial analyst Peter Talbot told nephew Carl Binette he heard Safeco was a target, the SEC says. The two bought call options for six days for a $615,000 profit, the SEC says. And Math Hipp allegedly used information from his wife, an assistant at Safeco, to profit by $118,000.
Anthony Perez agreed to pay a $25,000 fine; Ian Perez agreed to a disgorgement of $152,992. Hipp agreed to pay $239,770 to settle the charges. None admitted or denied the charges.
•Odyssey Investment Partners' purchase of Neff in 2005. The SEC charged six people with allegedly using advance information to profit. For instance, the SEC says, Sebastian De La Maza learned of the deal from his daughter, who is married to Neff's CEO. In the week before the deal, he bought the stock 14 times for a profit of $84,000. De La Maza denies any wrongdoing, says his attorney, Jim Sallah.
Thomas Borell, a lawyer, allegedly learned of the deal due to his relationship with a Neff director who is the brother of Neff's CEO. He made a profit of nearly $1 million on purchases, the SEC says. Borell denies any wrongdoing, says his attorney, David Chase.
None of the parties in the Neff case have settled, says the SEC's Glenn Gordon. The Neff CEO is not being charged, he says.
The actions show the SEC is hoping to get beyond criticisms it missed the Bernard Madoff Ponzi scandal. "The SEC is on the warpath," says securities lawyer Andrew Stoltmann.