Fri, 14/03/2014 - 12:16
The Securities and Exchange Commission (SEC) has charged a former analyst at an affiliate of hedge fund advisory firm SAC Capital Advisors with insider trading.
The SEC alleges that Ronald N Dennis got illegal tips from two friends who were fellow hedge fund analysts. They provided him confidential details about impending announcements at Dell Inc and Foundry Networks.
Armed with inside information, Dennis prompted illegal trades in Dell and Foundry stock and enabled hedge funds managed by SAC Capital and affiliate CR Intrinsic Investors to generate illegal profits and avoid significant losses.
Dennis, who lives in Fort Worth, Texas, has agreed to be barred from the securities industry and pay more than USD200,000 to settle the SEC’s charges.
“Like several others before him at SAC Capital and its affiliates, Dennis violated the insider trading laws when he exploited confidential information about public companies, in this case Dell and Foundry, to unjustly benefit the firms and enrich himself,” says Sanjay Wadhwa, senior associate director of the SEC’s New York regional office. “His actions have cost him the privilege of working in the hedge fund industry ever again.”
According to the SEC’s complaint filed in federal court in Manhattan, Dennis received illegal tips about Dell’s financial performance from Jesse Tortora, who was then an analyst at Diamondback Capital. Tortora and Diamondback were charged in 2012 along with several other hedge fund managers and analysts as part of the SEC’s broader investigation into expert networks and the trading activities of hedge funds. Dennis separately received an illegal tip about the impending acquisition of Foundry from Matthew Teeple, an analyst at a San Francisco-based hedge fund advisory firm. The SEC charged Teeple and two others last year for insider trading in Foundry stock.
The SEC alleges that Dennis caused CR Intrinsic and SAC Capital to trade Dell securities based on non-public information in advance of at least two quarterly earnings announcements in 2008 and 2009. Dennis obtained confidential details from Tortora, who had obtained the information from a friend who communicated with a Dell insider. Dennis enabled hedge funds managed by CR Intrinsic and SAC Capital to generate approximately USD3.2m in profits and avoided losses in Dell stock. Within minutes after one of the Dell announcements, Tortora sent an instant message to Dennis saying “your welcome.” Dennis responded “you da man!!! I owe you.”
The SEC’s complaint also alleges Dennis was informed by Teeple in July 2008 about Foundry’s impending acquisition by another technology company. Shortly after receiving the inside information, Dennis caused a CR Intrinsic hedge fund to purchase Foundry stock and generate approximately USD550,000 in profits when the news became public.
The SEC’s complaint charges Dennis with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 17(a) of the Securities Act of 1933. Dennis has agreed to pay USD95,351 in disgorgement, USD12,632.34 in prejudgment interest, and a USD95,351 penalty. Without admitting or denying the allegations, Dennis also has agreed to be permanently enjoined from future violations of these provisions of the federal securities laws. The settlement is subject to court approval. He would then be barred from associating with an investment adviser, broker, dealer, municipal securities dealer, or transfer agent in a related administrative proceeding.
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