INSIDER TRADING, AGGRESSIVE ENFORCEMENT AND BASEBALL
Insider trading is a key area of focus for SEC Enforcement. In the much touted reorganization, the new market abuse unit took charge of this high priority area. While criminal prosecutors have typically garnered the headlines with high profile cases and blue collar tactics, the SEC has been quietly but aggressively changing the ways that insider trading is investigated and redefining the edges of insider trading law as discussed here. These efforts are reflected in the recently released enforcement statistics which show the number of insider trading cases brought last year increased by 8%.
Now perhaps there is a new focus in insider trading – professional baseball players. Last August the Commission brought an insider trading action against Douglas Decinces, a former major league baseball player and others. SEC v. Decinces, Case No. CV11-1168 (C.D. Cal. Aug. 4, 2011). That case centered on the tender offer for Advanced Medical Optics Inc. by Abbott Laboratories Inc., announced on January 12, 2009. Mr. Decinces is alleged to have learned about the deal from an employee of Advance Medical and then traded and tipping others. Mr. Decinces settled that action with the Commission as discussed here.
On Friday the SEC brought another insider trading action against a former professional baseball player. This case named Jeffrey S. Richardson as a defendant. SEC v. Richardson, Civil Action No. 11-CIV-8556 (S.D.N.Y. Filed Nov. 25, 2011). The action centers on the acquisition by Genesis Energy, LP of several energy related businesses owned by the Davison family of Ruston, Louisiana. Prior to the announcement of the deal on April 26, 2007, Mr. Richardson received confidential information about the transaction from a person knowledgeable about the negotiations between Genesis and the Davison family. Mr. Richardson purchased units of Genesis on six different occasions between February 26 and April 25, 2007 in breach of his duty to that source, according to the SEC. He is also alleged to have tipped two family members and one friend, all of whom traded.
Mr. Richardson resolved the charges by consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b). He also agreed to pay disgorgement of $88,026 which is the amount of his trading profits as well as those of the two family members and the friend he tipped. In addition, Mr. Richardson agreed to pay prejudgment interest and a civil penalty equal to the amount of the disgorgement.