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SEC Charges Former Ameriprise Manager and Former Yahoo Executive with Insider Trading

The SEC charged Robert W. Kwok, Yahoo’s former Senior Director of Business Management, and Reema D. Shah, a former mutual fund manager at a subsidiary of Ameriprise Financial Inc., with insider trading.  The SEC alleged that Kwok provided Shah with information about Yahoo, including whether Yahoo’s quarterly financial performance was expected to be in line with market estimates, and confirming a partnership between Yahoo and Microsoft Corporation.  In turn, Shah provided Kwok with information she learned through the course of her work, and he used it to help make personal investment decisions.

In January 2008, Shah and Kwok began discussing their respective lines of work.  Shortly thereafter, Shah told Kwok that she had learned of the acquisition of Moldflow Corporation by Autodesk, Inc.  Based on this confidential non-public information, Kwok purchased 1,500 shares of Moldflow in his personal account.  Autodesk and Moldflow announced the acquisition on May 1, preceding Moldflow’s 11% stock increase.  Kwok sold his position for a profit of $4,754.  The SEC alleged that in July 2009, Shah reached out to Kwok seeking material non-public information about a reported partnership between Yahoo and Microsoft.  Kwok breached his fiduciary duty to Yahoo when he tipped Shah about Yahoo and Microsoft’s announcement.   Consequently, Shah prompted certain funds she helped manage to purchase 700,300 shares of Yahoo.  The shares were sold twelve days later, for a profit of approximately $389,000.

The SEC stated, “[w]hen corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors.”  In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York filed criminal charges against Kwok and Shah.  Kwok has pled guilty to conspiracy to commit securities fraud, and Shah has pled guilty to both a primary and conspiracy charges.