SEC Sues N.Y. Advisory Firm Owner Over Insider TradingJoshua Gallu
The U.S. Securities and Exchange Commission sued a New York investment adviser over claims he made illegal trades ahead of Pfizer Inc.’s planned acquisition of King Pharmaceuticals.
Tibor Klein made $319,550 for his clients and $8,824 for himself after learning confidential information about the planned merger in 2010, the SEC said in a complaint filed at U.S. District Court in Florida today. The agency also sued Michael Shechtman, a Florida-based stockbroker, who was allegedly tipped by Klein and generated more than $109,000 in illicit gains.
Klein learned the non-public information about the impending merger in August 2010 from one of his clients -- an attorney who worked on matters for King Pharmaceuticals, the SEC said. He began purchasing large amounts of the company’s stock the next day the markets were open, according to the complaint.
That same day, Klein made six phone calls to Shechtman, who opened an options trading account, the SEC said. Two days later, Shechtman, who had never before traded in options, purchased 2,500 shares of King Pharmaceuticals stock and 300 call options in his personal account, as well as 2,400 shares in his wife’s retirement account, according to the agency.
When the acquisition plans were announced in October 2010, King Pharmaceuticals stock rose about 39 percent.
“As securities industry professionals, Klein and Shechtman clearly know the difference between legal and illegal trading,” Eric Bustillo, director of the SEC’s regional office in Miami, said in a statement. “Instead of playing by the rules, they chose to exploit non-public information for an easy payday, but they didn’t plan on getting caught by the SEC.”
The SEC is seeking disgorgement of illegal profits and a financial penalty.
“We are aware of the claim and hopeful that it can be expeditiously resolved,” said Tucker H. Byrd, Klein’s attorney. An attorney listed by the SEC as representing Shechtman didn’t return a phone call seeking comment.