A former portfolio manager at an investment firm settled SEC charges for executing illegal trades based on nonpublic information.
According to the SEC, the former manager at S.A.C. Capital Advisors received nonpublic information on two occasions regarding (i) the probability of Yahoo! Inc. entering into an internet search engine partnership with Microsoft Corp., and (ii) Hewlett-Packard Company's intentions to acquire 3Com Corporation, a computer technology company. The SEC alleged that acting on nonpublic information in both instances, the former manager purchased "hundreds of thousands" of shares of Yahoo and 3Com stock on behalf of the hedge fund management firm where he worked, and generated approximately $1.5 million for the firm. The SEC further alleged that the manager purchased shares of Yahoo stock in his own personal trading account based on nonpublic information and reaped "substantial" gains for himself.
To settle the charges, the manager agreed to (i) an injunction from further violations of the federal securities laws, (ii) disgorgement of $130,145, (iii) prejudgment interest of $57,777, and (iv) a civil penalty of $130,145.
In addition, the SEC noted pending litigation against the individual who allegedly tipped off the former portfolio manager's informant about the nonpublic negotiations between Yahoo and Microsoft.
