by T. GormanPosted on Posted in SECActions

One question in the wake of the Second Circuit’s decision in Newman regarding the personal benefit test for illegal tipping has been how the SEC would respond to a decision the U.S. Attorney told the Court would significantly undermine insider trading enforcement. To date it has been mixed – the agency has brought cases in district court and as administrative proceedings as discussed here.

Yesterday the agency filed a settled insider trading case as an administrative proceeding. The allegations regarding the tipper and trader appeared to be standard, pre-Newman allegations. There was no quid pro quo claim. In the Matter of Helmut Anscheringer, Adm. Proc. File No. 3-16589 (June 15, 2015).

This action centers on the acquisition of Authen Tech, Inc. by Apple, Inc., announced on July 27, 2012. Respondent Anscheringer is a resident of Basel, Switzerland who owns residential property in Naples, Florida. He has been a friend and business colleague of Individual A for 30 years.

The deal traces to late 2011 when Apple expressed an interest in the fingerprint sensor technology owned by Authen Tech. Initially Apple sought a commercial arrangement regarding the technology. On May 1, 2012 Apple changed its approach, formerly proposing to acquire the company. Subsequently, the two firms worked on the terms of the acquisition and the licensing agreements. The final deal called for Apple to acquire the Authen Tech for $355 million in cash, the equivalent of $8 per share. At the time shares of Authen were trading at about $3.30 per share.

Individual A is an immediate family member of an Authen Tech executive who was active in the negotiations. This included communications with Apple. The executive learned about Apple’s May 1 proposal, according to the Order. He later communicated information about the offer to his family.

Mr. Anscheringer has known, and been friends with, Individual A for about thirty years. The two met in Basel while working for the same firm. Both own homes in Naples to which they travel, particularly during the winter months. Mr. Anscheringer knew that his friend was a member of a family one of whom was an executive at Authen.

On May 18, 2012 Mr. Anscheringer communicated with Individual A, according to the Order. That same day he purchased Authen securities for the first time. On two days in late July he again purchased Authen securities, acquiring 4,000 call option contracts. He also purchased an additional 2,000 shares through a company account of which he was the beneficiary.

Following the announcement the share price of Authen increased about 60%. Mr. Anscheringer realized profits of $1,820,024. The Order alleges violations of Exchange Act Section 10(b).

To resolve the matter Mr. Anscheringer consented to the entry of cease and desist order based on Exchange Act Section 10(b). He also agreed to disgorge his trading profits and to pay prejudgment interest and a civil penalty of $910,012.

Tagged with: , , ,

by T. GormanPosted on Posted in SECActions

The acquisition of Foundry Networks, Inc., a networking hardware company, by Brocade Communications System, Inc., a technology company specializing in data and storage networking products, announced on July 21, 2008, has spawned two enforcement actions by the Commission and two criminal case. The first SEC action, discussed here, named as defendants David Riley, Matthew Teeple and John Johnson, respectively Foundry’s chief information officer, an analyst at Artis Capital and an adviser at Artis. SEC v. Teeple, Civil Action No. 13-cv-2010 (S.D.N.Y.). The Commission settled that action with each defendant consenting to the entry of a permanent antifraud injunction. In addition, Mr. Riley agreed to pay disgorgement, prejudgment interest and a penalty totaling $9,082. Mr. Teeple paid a total of $166,532 and Mr. Johnson, who cooperated with authorities, paid disgorgement of $137,238 along with prejudgment interest and has been barred from the securities business.

In a parallel criminal case Mr. Riley was found guilty following a jury trial on one count of conspiracy to commit securities fraud and two counts of securities fraud. He was sentenced to 78 months in prison and ordered to pay a fine of $50,000. U.S. v. Riley, No. 13-cr-339 (S.D.N.Y.). Mr. Teeple pleaded guilty to one count of securities fraud, was sentenced to 60 months in prison and was ordered to pay a fine of $100,000. U.S. v. Teeple, No. 13-cr-339 (S.D.N.Y.).

The second SEC action names Andrew Miller as a defendant. SEC v. Miller, Civil Action No. 15-cv-4585 (S.D.N.Y. Filed June 12, 20145) Like the first, it centers on the Brocade-Foundry transaction. Following the deal announcement, made after the close of trading on July 21, 2008, the share price increased 32% on news that the deal was priced at $18.50 per share in cash plus 0.0907 shares of Brocade stock. As the firm’s chief information officer, Mr. Riley had learned about the deal three weeks earlier on July 1, 2008. Sixteen days later he told his friend and former colleague, Matthew Teeple about the deal. He in turn caused Artis Capital to purchase shares.

The same day – July 21 – Mr. Teeple called his friend Andrew Miller and told him he should purchase Foundry stock. One hour later Mr. Miller bought 850 shares in his mother’s account.

Although the Brocade – Foundry deal was announced on July 21, it was not completed until December 18, 2008. During the post announcement – pre-closing period there was conflicting information regarding whether the deal would in fact close. For example, a shareholder vote was scheduled for October 24, 2008. Brocade had announced an arrangement for a $1.225 billion secured credit facility to finance part of the deal. Brocade had not disclosed that it was experiencing difficulty securing an additional $400 million in financing for the deal.

Messrs. Riley and Teeple kept in touch, discussing key events. During the morning of October 16, 2008 the two men spoke. Foundry’s share price was $16.50. That evening Mr. Teeple spoke with Mr. Miller. Over the next two days Mr. Miller sold all of his shares and purchased 55 put options with a strike price of $15 per share and an expiration date of November 2008. The next week Foundry announced that the shareholder vote would be delayed until the end of October because of events related to the deal. The firm’s share price, which had been $17.04 at closing on October 23, dropped to a low of $9.25 before closing at $12.67. Mr. Miller reaped profits and avoided losses of over $40,000. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b).

Mr. Miller cooperated with the SEC and the U.S. Attorney’s Office. He resolved the Commission’s charges by agreeing to the entry of a permanent antifraud injunction. He will pay disgorgement of $40,136 along with prejudgment interest and a civil penalty of $20,068. See Lit. Rel. No. 23284 (June 12 2015).

Tagged with: , , ,