Professionals seem to becoming into the cross hairs of insider trading enforcement. Last week the Commission filed a series of insider trading cases centered on Georgia based CPA Thomas Melvin who had been consulted by a corporate board member, learned about a pending take-over and traded and tipped others. SEC v. Melvin, Case No. 1:12-cv-02984 (N.D. Ga. Filed August 28, 2012). Now the SEC has filed a settled insider trading action against a public relations specialist under similar circumstances. SEC v. Fraser, Civil Action No. CV 12-7574 (C.D. Ca. Filed Sept. 5, 2012).
Renee Fraser is the founder and chief executive officer of public relations firm Fraser Communications. On October 14, 2009 East West Bancorp or EWBC, a Pasadena, California based institution whose shares are traded on the Nasdaq Global Select Market, contacted Fraser Communications in connection with what is described as an “FDIC assisted transaction.” Confidentiality agreements were requested and obtained from the communications company and six of the firm’s employees on October 15, 2009, the date the firm was engaged for the transaction. The specific employees who signed the agreements were not specified.
The next morning Ms. Fraser purchased 10,000 shares of EWBC through her brokerage account at Morgan Stanley at an average price of about $9 per share. Less than one month later, on November 6, 2009, EWBC publically announced the acquisition of United Commercial Bank’s banking operations in an FDIC assisted transaction. Subsequently, on November 10, 2009, Ms. Fraser sold 7,500 of her EWBC shares. The remaining shares were sold on June 24, 2011. Profits from the sale totaled $43,868.
Ms. Fraser, who was given access to unspecified information solely for corporate purposes, breached her fiduciary duty to EWBC and its shareholders by purchasing the stock, according to the complaint. That complaint alleges violations of Exchange Act Section 10(b).
Ms. Fraser settled with the SEC, consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b). She also agreed to pay $43,868 in disgorgement along with prejudgment interest and a penalty equal to the amount of the disgorgement. In addition, Ms. Fraser agreed to be permanently barred from serving as an officer or director of a public company.