Another SEC Insider Trading Case As An Administrative Proceeding

The SEC filed another settled insider trading case. In the Matter of Abdallah Fadel, Adm. Proc. File No. 3-17111 (February 10, 2016). While the case is straight forward, what may be of interest is the fact that it is the sixth insider trading action filed in that forum since the holidays in December 2015 (here). It is clearly part of a continuing trend of filing cases in that forum (here).

Respondent was employed by Whirlpool Corporation. He began in 2007. In early 2009 he transferred into a group within the finance department called Financial Planning and Analysis. The focus of the group was furnishing management and the board with an analysis of the firm’s financial results.

Almost immediately after joining the group Mr. Fadel began trading in advanced of earnings announcements despite firm policies:

  • On October 23, 2009 Whirlpool announced its results for the quarter ended September 30, 2009. The announcement stated that EPS exceeded the street estimate, excluding onetime charges. The share price closed up 5%. Prior to the announcement Mr. Fadel purchased 20 call options which he sold for a gross profit of $6,400.
  • On April 26, 2010 the company announced its fiscal results for the quarter ended March 31, 2010. Again its EPS exceeded street estimates, excluding onetime charges. The stock closed up 10%. Prior to the announcement Mr. Fadel purchased 50 call options which yield a gross profit of $82,750 when liquidated.
  • On July 21, 2011 Whirlpool announced its financial results for the fiscal quarter ended June 30, 2011. This time its EPS was below street consensus. The company also announced that it lowered EPS guidance for the year. The stock closed down 4%. Prior to the announcement Mr. Fadel had acquired 250 put contracts. Those instruments were liquidated for a gross profit of $18,927.

The Order alleges violations of Exchange Act Section 10(b). To resolve the proceeding Respondent consented to the entry of a cease and desist order based on the Section cited in the Order. He is also barred from serving as an officer or director of a public company. In addition, he will pay disgorgement of $109,077, prejudgment interest and a penalty of $36,000.

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