Self-Reporting Yields, C&D, Disgorgement and Penalty

Insider trading is often thought of as difficult problem to detect and a complicated violation to prosecute. Sometimes that is true. The Commission has brought a number of very difficult and complex actions over the years. Many of those involved multi-million dollar transactions and trading into the U.S. markets from foreign countries. Nevertheless, the Commission and its data analytics team is able to tack together bits and pieces of trading, information about IP addresses and telephone or text records to quickly bring an action against those involved.

Other cases are smaller, involving trading in the thousands of dollars and only in the U.S. While these cases do not draw the headlines like the huge multi-million deal where eight figure trading profits are not uncommon, the agency still diligently puts together the bits and pieces of evidence to prove the case. And, contrary to what many believe, the same effort goes into prosecuting the small, one-person case and a few thousand dollars of trading profits – its all illegal. That is at least one lesson from the Commission’s most recent case in the area, Jana Faith Kiena, CPA, Adm. Proc. File No 3-19824 (June 5, 2020).

Ms. Kiena, a CPA with an inactive license, was employed at Illumina, Inc. in the revenue department in 2019 as a contract employee. She processed revenue related to monthly service contracts for the firm. She also participated in what the firm called “group huddles” – phone meetings where the staff chatted about the revenue flow.

In late June 2019 Ms. Kiena participated in one “huddle” with seven other employees and an accounting manager. The group in the huddle learned that revenue for the quarter would be disappointing. On July 2, 2019 Ms. Kiena used her credit card to obtain a cash advance. She then paid $13,638.33 to purchase July 12, 2019 put option contracts on ILMN, her firm The strike price was $365 per share. Six days later she took $3,096 from her savings account and purchased more put options.

On July 11, 2019 Illumina announced that its preliminary revenue for the second quarter would be lower than expected, updating full year guidance. The stock price dropped from $363.66 to $305.05 or 16%. The next day Ms. Kiena sold the put options, securing a gain of $249,227.92. Within a month Ms. Kiena self-reported to the Commission staff. The Order alleges violations of Exchange Act Section 10(b).

To resolve the proceedings Ms. Kiena consented to the entry of a cease and desist order based on the section cited in the Order. She also agreed to the entry of an order denying her the privilege of practicing before the Commission as an accountant with the right to request consideration for a reinstatement after two years. In addition, she will pay disgorgement in the amount of her trading profits and a penalty equal to half that amount.

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