by T. GormanPosted on Posted in SECActions

In its campaign against insider trading, the SEC has been very aggressive. Yesterday, the Commission continued this trend, filing an action against two French citizens residing in Belgium, Nicolas Condroyer and Giles Roger. SEC v. Condroyer, Case No. 1:09-cv-3600 (N.D. Ga. Filed Dec. 22, 2009). The complaint, which is litigation, is based on little more than the trading.

The case centers on the December 21, 2009 announcement by Chattem, Inc. that it agreed to beacquired by Sanofi-Aventis. Chattem is a manufacturer of various health care products based in Chattanooga, Tennessee. Sanofi-Aventis is a French corporation based in Paris. It is one of the world’s largest health care products companies. The take over price was $93.50 per share, a 32.6% premium to market.

Mr. Condroyer purchased approximately 1,970 Chattem call options for $42,000 between December 7 and 18, 2009. All of the options were out of the money when they were purchased through an account at optionsXpress, Inc., an on-line brokerage firm based in Chicago. The account had been opened on November 26, 2009.

Mr. Rogers purchased about 940 Chattem call options at a cost of about $38,000 on December 17, 2009. All of the options were out of the money. The purchases were made through an account at optionsXpress, Inc., opened on December 8, 2009.

Both defendants sold their positions the day after the take over announcement. Mr. Condroyer had a profit of $2.8 million while Mr. Rogers realized about $1.4 million. The Commission obtained a temporary freeze order over each account.

The complaint alleges that each defendant traded on inside information. The complaint however does not allege:

• The source of the inside information;

• That either defendant knew the other; or

• That either defendant knew anyone at either company

Indeed, the complaint makes it clear that the Commission is not quite sure when the acquisition negotiations began. In this regard it states that “on information and belief” the negotiations began “by November 2009,” which might be prior to the time Mr. Condroyer opened his account. No factual basis is stated to support the alleged “information and belief.”

The Commission has taken aggressive positions in under similar circumstances in the past when confronted with possible insider trading. In some instances the agency has been able to sustain its claims. In others it has not. Here, it is clear that the SEC will need to conduct extensive discovery to prevail.

by T. GormanPosted on Posted in SECActions

Everyone writes to Santa Claus this time of year. Just check out the classic film Miracle on 34th Street. A recent request under the Freedom of Information Act turned up a little known writer to the jolly man, reproduced below.

Dear Santa,

I want to begin by thanking you for the last year. You gave me a new Chairman and a new direction. It came at just the right time. Now I am moving forward and making substantial progress. Your gifts of new senior staff, including a Director to run my Enforcement Division and a General Counsel, are most appreciated. Thanks to what you gave me, I was saved from being merged out of existence after a series of unfortunate matters the media calls scandals. In fact, now I am getting even more funding from Congress. As if that was not enough, I am on the brink of getting more authority if you can just keep the elves lobbying for a little longer (I know they have worked hard all year, but Congress has a lot on its plate).

Thanks to your gifts this old agency is looking prosperous again. With the help of your elves, we have put together a long list of impressive looking rule-making projects. They include just about every topic to hit the papers or Congress this past year, including things like dark pools and executive pay. After giving the new senior enforcement staff the authority to issue formal orders, our stats in that department went way up. We are also working hard on the stats about money collected through penalties and disgorgement. You know how important those numbers are in congressional testimony and newspaper headlines. This Commission is looking good if I do say so myself (if you could just keep my enforcement cases off the dockets of Judge Rakoff in New York and Judge Carney in LA).

While I am most appreciative, there are a few things I need this year. I have been good, as you can see. It’s a short list.

1) Tone at the top: I thought that sign on the Chairman’s door about investors was it, but somehow that does not quite seem quite do the trick. In my stocking if you could just leave a do-it-your-self “tone at the top” kit I will have the staff assemble it and we will get right to it.

2) Vision: Covering each new hot topic of the year was supposed to show vision. Somehow that is not working. If you could leave a bag of vision under my tree, I will get it implemented right away (I heard it was at the New York Times store on-line, but couldn’t find it).

3) Market crisis cases: The market crisis has been front and center over the last year, as you know. I keep talking about all the market crisis investigations under way and all the staff members who are working so hard on them, but it does not seem to be enough. I even brought a couple cases, but that did not do it. I need some real important market crisis cases. If you could just have the elves bring a detective kit and help the Enforcement Division for a short time, I am sure they can put some cases together that will be quite grand.

4) Top Wall Street Cop: Most of all Santa, I want to restore my Enforcement Division to being the Top Cop of Wall Street, the enforcer of the securities laws. I know – I was there once. I just cannot seem to find my way back. I have tried everything – big penalties, following DOJ – nothing works. I seem to be an afterthought in the enforcement world. I think if you could leave in my stocking real “Top Cop” badges, everyone would pay attention. Surely this will do it.

Thanks again, Santa – I really appreciate all the help. With these new gifts it will be a great year.

Your friend,

The Securities & Exchange Commission