Originally Posted by LeftWriteFemme
SEC Charges Five Individuals for Insider Trading Tip From AA Meeting
by Reese Darragh on March 14, 2012
The Securities and Exchange Commission brought civil insider-trading charges against five individuals who allegedly made more than $1.8 million profits based on a tip obtained through an Alcoholics Anonymous meeting.
In the filing, the regulator charged Timothy McGee, a financial adviser at Ameriprise Financial Services for making illegal stock trading of Philadelphia Consolidated Holding Corp after he received insider information of a pending merger between the company and Japanese firm Tokio Marine Holdings.
A fellow AA member who is also a senior executive at the firm had confided with McGee during one of the support group meeting that the pressure over the merger were leading him to drink. Utilizing the information, McGee purchased the company’s stock in advance of the July 23, 2008 merger and gain $292,128 when the stock price of Philadelphia Consolidated increased by 64 percent on the news.
Sharing the Wealth
McGee also allegedly shared the tip with a co-worker, Michael Zirinsky, who purchased stock in his own trading accounts as well as his family. Per The Wall Street Journal, Zirinsky also shared the information with his father, Robert Zirinsky, and a friend in Hong Kong, Paolo Lam, who in turn shared the information with another friend, whose wife, Marianna Sze Wan Ho, also traded on the information.
The SEC also named four Zirinsky relatives as relief defendants, seeking disgorgement of ill-gotten gains. They were not charged in the case. Altogether, the Zirinsky family made $562,673.
Elsewhere in Hong Kong, a Reuters report confirmed that Lam and Ho have agreed to settle the charges with the SEC without admitting or denying the allegations. Lam made $837,975 while Ho gained $110,580 through their bets on the information. Lam and Ho will pay $1.2 million and $140,000 respectively to the SEC.
The SEC is pursuing penalties against McGee, Michael Zirinsky and his father, Robert Zirinsky.
AA Shield
Unlike the common insider trading cases that often revolve around the breach of confidential duty between an employee and the company’s shareholders, the executive of Philadelphia Consolidated is not charged with any wrongdoing.
The SEC’s suit on Tuesday said that McGee misused the information obtained from his relationship with the executive because the relationship was forged through AA meetings. AA’s twelfth tradition policy designed to encourage participants to speak freely but anonymously.
“By spring and early summer 2008, while the PHLY executive was participating in the merger negotiations and under significant pressure to ensure a successful sale, he and McGee had known each other for almost a decade and forged a close relationship in which they routinely shared confidences about each other’s personal lives and problems impacting them professionally,” the SEC said.
Insider trading case stemmed from an AA meeting is a first for the regulator.
I guess the AA program has to be restructured for members to eliminate certain details of their work from now on.
Reese Darragh is a contributing writer for CompliancEX and Wall Street Job Report. She is an experienced business news writer with expertise in macroeconomics topic, the financial industry, rules and regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act as well as rules from other federal regulators. She has a Master Degree in International Economics and Finance from Brandeis University.
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