SEC Fines Defendants for Trading on Information from Hacked News Release
Commentary by Steven Lofchie
The SEC entered into settlement agreements with several firms for an alleged scheme to trade on hacked news releases. The combined disgorgement totals nearly $18 million.
The SEC charged that the defendants hacked the computer servers of at least two newswire services and stole confidential earnings information for numerous publicly-traded companies from press releases that had not yet been released to the public. The defendants then used that stolen material nonpublic information to trade securities and make over $100 million in illegal profits.
Further, the SEC alleged that, as recently as May 2015, some of the defendants continued to pursue this scheme by trading in front of press releases issued from a third newswire service that had been hacked.
Commentary
Given that out-of-the-country bad guys are unlikely to be much deterred by this penalty, and that cyber-protections of news agencies are outside of the corporate issuers' control, issuers should take this enforcement action as a precaution to consider the timing of their distribution of press releases. There seems to be no assurance that such releases can be kept protected until their official distribution time.