SEC Charges Two Credit Card Company Employees with Insider Trading (with Lofchie Comment)

The SEC announced charges against two data analysts for engaging in insider trading on the basis of material and nonpublic information about the sales of predominantly consumer retail corporations. The data analysts were employed by a large credit card issuer during the time in which they engaged in the illegal trading.

The SEC alleged that the employees were tasked with investigating fraudulent credit card activity. According to the SEC, the employees searched their employer's nonpublic database for information that had no relation to their employment duties. This allowed them to view and analyze the aggregated sales data of the companies for which they searched.

The SEC found that the employees made profitable securities transactions on the basis of this material, nonpublic information in advance of the public releases of quarterly sales announcements by these companies.

Lofchie Comment: These charges illustrate two important points about insider trading: (i) employers should monitor the information access of their employees, particularly their IT employees, and (ii) it is possible to bring insider trading charges based on the improper acquisition of information from any source; that is, based on information that need not have come from the issuer or its agents.

See: SEC Litigation Release.See also: Insider Trading Specialty Page (available to Cabinet subscribers only).