The SEC’s campaign against insider trading continued this week, extending trends from last year. Two cases filed this week based on trading in advance of take-over announcements involved, respectively, a father and son and a corporate director and an attorney in private practice.
Another family trading together. In SEC v. Norton, Civil Action No. 2:08-CV-541 (D. Nev. April 29, 2008), the Commission filed a settled insider trading case against a father and a son. The SEC’s complaint focuses on trading in advance of the take-over announcement of Valley Bancorp by Community Bancorp. Community Bancorp director Charles R. Norton learned that the bank was about to acquire Valley Bancorp at a board meeting. Subsequently, Chad Norton, the son of Charles Norton, purchased 7,000 shares of Valley Bancorp stock prior to the announcement of the take-over. After the announcement the shares were sold yielding a profit of $35,064.71.
To settle the action, the father and son consented to the entry of permanent injunctions prohibiting future violations of the anti-fraud provisions. Chad Norton also agreed to the entry of an order directing that the trading profits be disgorged and requiring the payment of prejudgment interest and a civil penalty equal to the trading profits. Charles Norton also consented to the entry of an order requiring that he pay a penalty equal to the trading profits and a five year officer/director bar. This is the latest in a series of family insider trading cases. Last year, the SEC brought a number of actions frequently referred to as “pillow talk” cases which involved allegations of insider trading by spouses and in some instances family members that were insider trading rings as discussed here.
Another director and attorney. In SEC v. Boshell, Civil Action No. 08-CV-2392 (N.D. Ill. April 28, 2008) the Commission filed a settled insider trading case against a corporate director and outside counsel. This case is also based on trading in advance of the public announcement of a takeover, in this instance the acquisition of Laserscope by American Medical Systems Holding, Inc.
According to the complaint, defendant Edward Boshell, a director of American Medical Systems, learned during a board meeting that the company would acquire Laserscope. Defendant Donald Pochopien was a shareholder of a Chicago law firm that served as counsel to American Medical in the due diligence review of the potential Laserscope acquisition. Prior to the public announcement of the acquisition, both defendants traded in the securities of Laserscope. Mr. Boshell made profits of over $85,000 while Mr. Pochopien is alleged to have made profits of over $134,000.
To settle this action, both defendants consented to the entry of statutory injunctions prohibiting future violations of the antifraud provisions and orders requiring the payment of disgorgement, prejudgment interest and civil penalties equal to the amount of the disgorgement. This case, like the Norton case, continues a trend from last year when a number of insider trading cases were brought against corporate directors and attorneys as also discussed here.