District Court Finds Insider Trading

The US District Court for the Southern District of Texas entered a final judgment against an individual for trading on nonpublic information obtained from his then-wife, prior to a corporate acquisition.  

In the Complaint, the SEC alleged that the individual purchased shares of a "full service truck stop and travel center company" that was to be acquired by a multinational oil company, prior to the acquisition announcement. According to an SEC litigation release, the Court found that the individual misappropriated the "material, nonpublic information regarding the planned acquisition" from his former wife, who was an employee of the acquirer. The Court found that the individual realized an illicit profit of $1,760,000.

The Court issued a permanent injunction prohibiting further violations of SEA Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") and SEA Rule 10b-5 ("Employment of manipulative and deceptive devices") and imposing an officer and director bar. The individual agreed to (i) pay disgorgement of $1,760,000 plus prejudgment interest of $85,600.06 for a total of $1,845,600.06. The Court did not include a civil penalty in the final judgement because the individual was sentenced to imprisonment in a corresponding criminal case.