SEC Brings Another Insider Trading Administrative Proceeding
The SEC filed another settled insider trading action, charging a corporate executive. The action is not remarkable and is straight forward. What makes it noteworthy, however, is that the case is the fourth insider trading action brought as an administrative proceeding dating back to just before the holidays. In the Matter of Reid A Hackney, CPA, Adm. Proc. File No. 3-17-47 (January 12, 2016).
Mr. Hackney served as the Chief Financial Officer and Senior Vice President of the Dress Barn subsidiary of Ascena Retail Group, Inc. from November 2011 through March 2012. He was designated as a key employee. As such he was subject to the insider trading policies of the firm as well as additional restrictions on his trading.
On January 1, 2012 Mr. Hackney was notified in an email of the weekly and monthly sales figures for the firm’s subsidiaries. The comparable sales for the month of December had increased 12%.
Two days later Mr. Hackney purchased 15 Ascena call options. The expiration date was January 21, 2012. On January 5, 2012 the firm issued a press release announcing strong holiday sales and raising EPS guidance. The stock closed up 5.64%. Mr. Hackney sold his call options, realizing profits of $3,300.
By late March 2012 the company had taken substantial steps toward a cash tender offer for all of the shares of Charming Shoppers common stock. On or before March 27 Mr. Hackney became aware of the proposed deal. Over the next three days he purchased 350 Charming Shoppers call option contracts with a strike price of $5.00 and an expiration date of May 19, 2012.
Following the deal announcement on May 2, 2012 the options were sold. Mr. Hackney realized profits of $44,750.
The Order alleges violations of Exchange Act Sections 10(b) and 14(e). To resolve the proceeding Mr. Hackney consented to the entry of a cease and desist order based on the Sections cited in the Order. He also agreed to the entry of an order denying him the privilege of appearing and practicing before the Commission as an accountant. He was barred from serving as an officer or director for a period of five years. Mr. Hackney will pay disgorgement of $48,050, prejudgment interest and a penalty equal to the amount of the disgorgement.