News and Articles

Monthly Archives: May 2012

SEC Charged a Hollywood Movie Producer with Insider Trading

The Securities and Exchange Commission (“SEC”) charged Mohammed Mark Amin, a Hollywood movie producer, and five of his close acquaintances, with insider trading in DuPont Fabros Technology (“DFT”). DFT owns, develops, operates and manages facilities that maintain computer servers for companies such as Yahoo!, Facebook, Microsoft, and Google. 

The SEC alleged that Mr. Amin, who served on DFT’s board of directors since 2007, along with two of his relatives and three friends, used material non-public information to purchase and ultimately illegally profit in DFT securities. As a member of the board of directors, Mr. Amin attended a special board meeting on December 22, 2008 and participated in a telephone conference call with DFT’s CEO, on January 7, 2009. During these meetings, Mr. Amin acquired inside information.

According to the SEC’s complaint, after his telephone conference with DFT’s CEO, Mr. Amin tipped his cousin and asked him to purchase $100,000.00 of DFT shares. Between January 8 and February 10, 2009, Mr. Amin and his acquaintances purchased 405,150 shares of DFT shares, generating more than $618,000.00 in illicit profits. On February 11, 2009, DFT released its 2008 earnings report, disclosing the previously non-public information, causing DFT’s stock to increase 36%.

The SEC said, “Mark Amin disregarded his board responsibilities and betrayed shareholders at DuPont Fabros in favor of giving his circle of relatives and friends an inside scoop to trade on nonpublic information.”  Mr. Mark Amin resigned from DFT’s board of directors in February 2011. Without admitting or denying the allegations, the Defendants agreed to collectively pay nearly $2 million in disgorgement, interest and penalties.

SEC Charges Paralegal and Her Father in Insider Trading Scheme

The Securities and Exchange Commission (“SEC”) charged Angela Milliard, a former paralegal for Semitool, Inc., with trading on confidential information regarding the acquisition of Semitool by Applied Materials.

According to the SEC, in October 2009 Ms. Milliard learned through her employment at Semitol, of Applied Materials’ tender order to acquire Semitool.  The tender offer of $11 per share presented a significant premium above Semitool’s then trading price of $7.83.  This information was material and confidential.

The SEC’s complaint alleged that Ms. Miller, in an effort to conceal her trades, wired money to her boyfriend’s brokerage account and used it to secretly buy Semitool stock.   Between October 28 and November 16, 2009, Ms. Milliard purchased 5,700 Semitool shares in her and her boyfriend’s brokerage accounts.  At the same time, she tipped confidential information about the merger to her father.  Her father and other family members purchased 14,800 Semitool shares.  On the morning of November 17, 2009, after Applied Materials announced its acquisition, Ms. Milliard, her father and certain family members sold their shares for profits of $68,160.11.

The SEC stated, “Angela Milliard exploited her access to confidential merger and acquisition information to illicitly enrich herself and her family.”  And “[a]s a member of a legal department entrusted with sensitive deal documents, she had a duty to safeguard that information, not trade on it.”

Ms. Milliard and her father agreed to settle the SEC’s charges by paying $175,367.01 in disgorgement, interest and penalties.

FINRA Sanctioned Four Brokerage Firms for Unsuitable Leveraged & Inverse ETF Transactions

The Financial Industry Regulatory Authority (“FINRA”) sanctioned Citigroup Global Markets Inc., Morgan Stanley & Co., LLC, UBS Financial Services, and Wells Fargo Advisors, LLC (the “firms”), for improper transactions involving leveraged and inverse exchange-traded funds.  FINRA ordered the firms to pay the following: Citigroup, $2 million fine and $146,431.00 in restitution, Morgan Stanley, $1.75 million fine and $604,584 in restitution, UBS, $1.5 million fine and $431,488.00 in restitution, and Wells Fargo, $2.1 million fine and $641,489 in restitution.

According to FINRA, leveraged and inverse ETF’s have particular risks not found in traditional ETF’s.  Most of these products “reset” daily, meaning that they are designed to achieve their stated objectives on a daily basis.  FINRA’s investigation revealed that each firm sold billions of dollars of these non-traditional EFT’s.  The firms exposed investors to risks and unpredictability factors inherent in these products, especially when held over a period longer than a day.

FINRA’s investigation found that from January 2008 through June 2009, the firms did not have adequate supervisory systems to monitor the sales of the products and failed to conduct proper due diligence regarding the risks and features of inverse ETF’s.   Furthermore, the firms’ registered representatives made unsuitable recommendations of these products to some customers with conservative investment objectives and/or risk profiles.  FINRA said, “[t]he added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers.  Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products.”

By accepting the settlement, the firms neither admitted nor denied the charges.