SEC Settles Insider Trading Case With Petroleum Engineer

While the focus for the Commission may be retail investors and cyber, insider trading will no doubt continue to be a key concern. This is reflected in the action brought yesterday against an petroleum engineer who profited from using inside information obtained through his work. SEC v. Lollar, (W.D. Tx. Filed Nov. 1, 2017).

Christopher Lollar was a petroleum engineer for Apache Corporation from January 2014 through June 2017. Apache is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. The firm’s shares were traded on the New York Stock Exchange.

Beginning in 2014, and continuing through mid-2016, Apache sought to develop the Alpine High resource play. The company did extensive geologic and geophysical work and other testing and drilling. On July 14, 2016 a group of engineers made a presentation about the play to the board of directors. While Mr. Lollar did not work on the presentation or attend the board meeting, he was part of the group of engineers that presented to the board. He thus had access to reports and information about the resource play.

Following the board presentation, Apache decided to make a public announcement about the Alpine High resource play. Between August 25 and September 2, 2016 a press release was drafted. The plan was to issue it on September 7, 2016 prior to a presentation by the firm’s CEO at the 2016 Barclays CEO Energy-Power Conference. Accordingly, the announcement was made prior to the opening of the market on September 7. When the market opened the share price of Apache stock increased, closing up 6.7% for the day.

Mr. Lollar had two securities accounts. One was at Fidelity. In August 2016 Mr. Lollar sold all the securities in the account. He made two purchases of Apache stock with the proceeds, one on August 18 and the second on August 23, 2016. Mr. Lollar had acquired 461 shares of Apache stock which he sold after the announcement on September 7 for a profit of $24,580.60.

The second account was at OptionsHouse. On September 2 and 6 he added funds to the account. On September 6 he purchased 490 Apache call options with an expiration date of September 9, 2016. After the firm’s September 7th announcement Mr. Lollar sold the options, reaping profits of $211,921.00. The complaint alleges violations of Exchange Act Section 10(b).

To resolve the action Mr. Lollar agreed to pay disgorgement of $214,295.07, prejudgment interest and a penalty equal to the amount of the disgorgement.

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