On March 14, the Securities and Exchange Commission filed civil charges against Jun Ying for allegedly trading on proprietary nonpublic information related to the massive 2017 hack and data breach of his employer, Equifax, Inc., in advance of the firm’s public announcement of the incident. At the time, Mr. Ying was chief information officer of Equifax’s US Information Systems business unit. According to the SEC, after Equifax’s detection of the possible widespread breach in July 2017, Mr. Ying was enlisted on August 25 on a project to help deal with certain aspects of the problem. At the time, Mr. Ying was not advised that the breach was of Equifax’s own system; however, by August 28, he deduced this from information he was given. In response, Mr. Ying exercised and sold options he owned, realizing total proceeds in excess of US $950,000. After the close of the market on September 7, Equifax made a public announcement regarding its data breach. According to the SEC, by selling his Equifax shares prior to the public announcement, Mr. Ying avoided a US $117,000 loss he would have incurred had he sold his shares after the news became public. The SEC filed its action against Mr. Ying in a federal court in Atlanta. On March 13, Mr. Ying was also indicted for insider trading by a federal grand jury for the same conduct.
Legal Weeds: Actions sounding in insider trading are no longer within the sole purview of the SEC. The Commodity Futures Trading Commission has now brought two enforcement actions charging persons with insider trading for misappropriating their employer’s trading information. In the first action brought in 2015, the CFTC alleged that Arya Motazedi, a gasoline trader for a large publicly traded corporation, similarly misappropriated trading information of his employer for his own benefit. In the second action, the CFTC brought and settled charges against Jon Ruggles, a former trader for Delta Airlines, for trading accounts in his wife’s name based on his knowledge of trades he anticipated placing for his employer. Both actions were grounded in a provision of law under the Dodd-Frank Wall Street Reform and Consumer Protection Act and a CFTC rule that prohibit use of a manipulative or deceptive device or contrivance in connection with futures or swaps trading. (Click here to access Commodity Exchange Act Section 6(c)(1), US Code § 9(1), and here to access CFTC Rule 180.1. Click here for background on these CFTC enforcement actions in the article “Ex-Airline Employee Sued by CFTC for Insider Trading of Futures Based on Misappropriated Information” in the October 2, 2016 edition of Bridging the Week.)