SEC Continues to Focus on Insider Trading
Insider trading has long been a key focus for SEC Enforcement. Today is no different. The current enforcement program under Chair Gensler and his Enforcement Director, Gurbir Grewal, appears to focus on traditional enforcement areas such as insider trading and the use of time-tested tactics such as keying on gatekeepers and enhanced remedies. The latest insider trading action brought by the agency is consistent with this focus, SEC v. Forte, Civil Action No. 1:22-cv-10074 (D. Mass. Filed January 19, 2022).
The case focuses on the merger involving Linear Technology Corporation and Analog Devices, Inc., announced in July 2016. Named as defendants are: David Forte, a former police officer whose brother was the information officer of Analog; John Younis, the owner of a building company; and Gregory Manning, a senior accountant for a public healthcare technology company. Linear, whose common stock was traded on NASDAQ, is a manufacturer of integrated circuits used for a variety of applications. Analog, whose stock is registered with the Commission under Exchange Act Section 12(b), is also the manufacturer of integrated circuits.
Defendant David Forte misappropriated material nonpublic information about the Linear-Analog transaction prior to the announcement date from his brother, a former executive at Analog. Prior to the public announcement Defendant Forte is alleged to have told close friends John Youmis and Gregory Manning, both defendants in this action who purchased shares. The two traders purchased over 30 Linear call options.
On July 27, 2016, a news article reported rumors about the Linear-Analog deal. At the time the transaction was not public. Later that day the two firms issued a joint press release announcing the execution of a merger agreement. The next day the traders sold their securities. They realized profits of over $90,000. The complaint alleges violations of Exchange Act Section 10(b). The case is pending. The U.S. Attorney’s Office fed a parallel criminal action, charging the three men. See Lit. Rel. No. 25311 (January 19, 2022).