The SEC and the Manhattan U.S. Attorney’s Office added the reputed source of the inside information to their actions against two former registered representatives for insider trading. Trent Martin, an Australian citizen who is a former research associate at an international financial services firm, is now alleged to have been the source of inside information for Thomas Conradt and David Weishaus, two former brokers who are alleged to have traded on inside information involving the acquisition of SPSS Inc., by International Business Machine Corporation, announced on July 28, 2009. SEC v. Conradt, Civil Action No. 12-cv-8676 (S.D.N.Y. Filed Nov. 29, 2012).
Mr. Martin was arrested earlier this month in Hong Kong. He is alleged to have been friends with an associate working at a New York City based law firm that was retained in connection with the transaction. The associate told Mr. Martin about the transaction in confidence. Mr. Martin is alleged to have misappropriated the information and passed it on to Messrs. Conradt and Weishaus who, along with others, traded. Instant messages exchanged between the Messrs. Conradt and Weishaus confirm that the two men believed they were in possession of material non-public information. Those messages also reference “Trent.”
In the criminal case Mr. Martin has been charged with one count of conspiracy to commit securities fraud and one count of securities fraud. The SEC’s action alleges violations of Exchange Act Section 10(b).
The initial court papers, filed at the end of November by the SEC and the U.S. Attorney’s Office, charged attorney Thomas Conradt, formerly a registered representative at a New York City brokerage firm, and David Weishaus, a law school graduate who was also formerly an employee at a broker-dealer. Those papers alleged that Mr. Conradt obtained inside information on the deal from his roommate who, in turn, obtained it from an associate at a law firm working on the deal. Neither the roommate nor the associate were identified. The defendants, and other downstream tippees, purchased shares and options in advance of the deal announcement. Following the announcement the two defendants, along with three other registered representatives tipped but not charged in the actions, had trading profits of over $1 million. The cases are pending. See also Lit. Rel. No. 22549 (Nov. 29, 2012).