The theory of “broken windows,” the enforcement approach being pursued by the SEC, is that prosecuting all violations large and small creates deterrence. That comes from a kind of omnipresence, or a cop on the beat impact. In the SEC’s case of course there is no beat or cop so it is the publicity of cases that helps create deterrence.
That approach seems to have been lost on Dimitry Braverman, a senior IT employee at Wilson Sonsini Goodrich & Rosati. Indeed, not even a cop in the office deterred him. Mr. Braverman is now accused of trading on inside information he obtained from his employer before another firm employee was charged with insider trading and after by both the Manhattan U.S. Attorney’s Office and the Commission. SEC v. Braverman, Case No. 14 CV 7482 (S.D.N.Y. Filed September 16, 2014).
For a period of three years, beginning in 2013, Mr. Braverman is accused of trading on inside information obtained from Wilson Sonsini. As a senior IT employee Mr. Braverman worked on programing and maintaining software for the law firm. His position gave him access to firm databases that contained information about new client matters, client conflict checks, billings and attorney time sheets. He also had access to material non-public information about impending M&A deals in which the firm represented one party. The information included the existence and nature of the pending deals and the identity of the parties and counterparties to the transactions.
Prior to April 2011 Mr. Braverman is charged with trading on inside information in four deals in which Wilson Sonsini represented one of the parties. The trades were placed in his personal account in his name.
In April 2011 the SEC charged a Wilson Sonsini lawyer with insider trading. Mr. Braverman then liquidated his remaining securities positions which were based on firm information. Two days later Mr. Braverman’s brother, who he tipped, liquidated his positions.
About eighteen months later Mr. Braverman opened a new brokerage account in the name of a relative and Russian citizen and resident, Vitaly Pupynin. The e-mail address associated with the account initially was the same one he used to open other accounts. Later it was changed to one associated with Mr. Pupynin. From November 2012 through December 2013 he continued his to trade on inside information obtained from the firm.
The deals on which Mr. Braverman traded were:
- The acquisition by Bain Capital Partners, LLC of Gymboree Corporation, announced on November 23, 2010;
- The acquisition by Walgreen Company of drugstore.com, Inc., announced on June 3, 2012;
- The acquisition by Apax Partners L.P. of Epicor Software Corporation, announced on May 16, 2011;
- An equity transaction involving Seagate Technology PLC and Samsung Electronics Co., Ltd.;
- The acquisition by Gilead Sciences, Inc. of YM Biosciences, Inc., announced on February 8, 2013;
- The acquisition by Astrex Pharmaceuticals, Inc. of Otsuka Pharmaceutical Co., Ltd.;
- The acquisition by Dealer.com of Dealertrack Technologies, Inc.; and
- The acquisition by Seagate of Xyratex Ltd. , announced on March 31, 2014.
Overall Mr. Braverman had trading profits of about $300,000. The Commission’s complaint alleges violations of Exchange Act Sections 10(b) and 14(e). This action, along with the parallel criminal case, is pending.