SEC Charges Former BP Employee with Insider Trading during the Deepwater Horizon Oil Spill (with Bondi Comment)

The SEC charged a former BP employee, who was a "senior responder" for BP during the 2010 Deepwater Horizon oil spill, with insider trading based on confidential information as to the magnitude of the disaster.

According to the SEC Complaint, BP tasked Keith A. Seilhan with coordinating BP's oil collection, containment, and cleanup operations. Within days of the spill, Seilhan received nonpublic information about the extent of the evolving disaster. Additionally, the SEC found that BP's filings with the SEC potentially underestimated the flow rate of the spill by over 50,000 barrels of oil per day. The SEC alleges that Seilhan knew the true magnitude of the oil spill and so understood that BP's potential liability and financial exposure was likely to be greater than had been publicly disclosed.

In the words of the SEC Complaint, Seilhan directed the sale of his family's "entire $1 million portfolio of BP securities" over the course of two days in late April 2010. The trades allowed Seilhan to avoid losses and reap unjust profits as the price of BP securities dropped by approximately 48 percent after the sales on April 29 and April 30, 2010.

Bondi Comment: At first blush, this might appear to be a simple "classical" theory of insider trading: an insider allegedly trades on basis of material nonpublic information. Yet what makes these allegations unusual is that they indicate a disclosure problem in addition to an insider-trading problem. Regardless, the SEC will need to prove that the insider knew more than what was publicly available, and that the nonpublic information was material - which means that it might be more accurate to call this a "classical" insider trading case with a disclosure twist.

See: SEC Complaint.See generally: The Cabinet Insider Trading Landing Page.