SEC Settles Insider Trading Action With Corporate Executive
Insider trading has long been a staple of SEC enforcement. The agency has brought a number of actions against corporate executives who have abused their position by using inside information entrusted to them for personal gain rather than the corporate purpose for which they received it. The Commission’s action against Silicon Valley executive Peter Nunan is another example of such an action. SEC v. Nunan, Civil Action No. 5:16-cv-02373 (N.D. Cal. Filed May 2, 2016).
Mr. Nunan was a Senior Engineering Fellow at Screen SPE USA, a subsidiary of Screen Holdings Co., Ltd. Screen Holdings is a Japanese semiconductor equipment company. This action centers on the acquisition by Tokyo Electron of FSI International, Inc. , a Minnesota based supplier of semiconductor equipment services, announced on August 13, 2012.
By December 2011 Tokyo Electron, a Japanese semiconductor equipment company, was in negotiations to acquire FSI. By August 2012 substantial steps had been taken toward the commencement of a tender offer. A letter of intent with proposed pricing had been submitted; an exchange of confidential information had taken place; and due diligence work was done. The negotiations continued.
By February 2012 a member of FSI’s board of directors who had a professional relationship with Mr. Nunan informed him about the negotiations. The discussions between the two continued into August 2012. They were intended to be confidential. The information was disclosed to permit Mr. Nunan to try and obtain a competing bid. Mr. Nunan furnished the information to the executive at Screen Holdings responsible for evaluating a potential competing bid. Ultimately Screen Holdings chose not to submit a bid.
During the time he was receiving information on the proposed tender offer, Mr. Nunan purchased shares of FSI. Specifically, between February 14 and August 9, 2012 he acquired 105,000 shares of FSI. He also recommended that his brother purchase shares. On July 23, 2012 his brother bought 1,000 shares.
Following the announcement of the tender offer, the share price increased 50%. Mr. Nunan sold most of his FSI stock the next day. He had realized and unrealized profits of $254,858. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e).
Mr. Nunan resolved the matter, consenting to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. He also agreed to the entry of an order requiring him to pay $254,858 in disgorgement, prejudgment interest and a penalty equal to the amount of the disgorgement.