SEC Charges Individuals with Insider Trading Prior to eBay Acquisition; First SEC Non-Prosecution Agreement with an Individual
The SEC charged a former marketing executive of e-commerce company GSI Commerce ("GSI") with insider trading in advance of eBay's acquisition of GSI. The SEC also charged five traders and entered into a non-prosecution agreement with a trader who provided "extraordinary cooperation" in the investigation.
According to the SEC complaint, the CEO of GSI's market solutions division provided family members and friends with nonpublic information about the pending acquisition and encouraged them to trade on it. The SEC also instituted and settled administrative proceedings against two other traders in GSI stock who received material nonpublic information from a different source.
This is the SEC's first non-prosecution agreement with an individual.
See: SEC Press Release.
Commentary
This is the first instance of an individual having successfully negotiated a non-prosecution agreement with the SEC, more than four years after the SEC first announced its cooperation initiative in 2010. This case brings the Enforcement Division in parity with federal prosecutors in its use of all possible tools in its enforcement arsenal to build the widest-ranging and strongest cases against those alleged to have violated the securities laws. There is now no question about the potential benefit of cooperation with the SEC, even in a case such as this one, where the SEC Staff seems prepared to recommend an enforcement action against the individual. Cadwalader represented the individual with whom the SEC entered into a non-prosecution agreement.