SEC Charges Consultant with Insider Trading on an Impending Acquisition Offer

The SEC charged a consultant and his friend with insider trading regarding an impending acquisition of a company, in violation of Securities Exchange Act Rule 10b-5 ("Employment of Manipulative and Deceptive Devices"). The SEC alleged that the consultant to a restaurant chain tipped his friend with confidential details about its bidding process that he learned while providing executive coaching services to the chain's top management executives. The SEC charged that the consultant then purchased "risky, out-of-the-money call options" for the restaurant chain's securities and tipped his friend to do the same. The accused individuals then immediately sold their options for a combined total of approximately $300,000 following a public announcement about the tender offer by a third party for ownership of the restaurant chain.