Among recent enforcement actions taken by the SEC were charges against a woman for illegally tipping her brother about quarterly earnings data from the firm she worked for; against a Chicago-based investment advisor for defrauding CalPERS, among other clients; against a Denver-based businessman for insider trading; against a Canada-based investment banker, also for insider trading; and against two Arizona-based brokers for defrauding investors.
Sister Charged With Illegally Tipping Off Brother
ThanhHa Bao, a former employee at Abaxis, a California-based medical device manufacturer, was charged by the SEC with illegally tipping her brother, Tai Nguyen, with insider information she had obtained from her position in the company’s finance department.
From 2006 to 2009, Bao made a practice of providing her brother with quarterly earnings data from Abaxis. He used the information for his own benefit, but also passed it along to the hedge fund managers Barai Capital Management and Sonar Capital Management, clients of his equity research firm, Insight Research. The fund managers then also used the information to make more than $7.2 million for their hedge funds.
Nguyen was charged last year for his actions, both by the SEC and in a separate criminal proceeding. The trades made him $144,910; the criminal proceeding cost him a forfeiture of $400,000. Those at the hedge funds who took advantage of the information were charged in 2011.
The SEC’s investigation is continuing.
Advisor Charged in CalPERS Fraud
Mesh Tandon, CEO of the Chicago-based investment advisory firm Simran Capital Management, has been charged by the SEC with lying to the California Public Employers’ Retirement System (CalPERS), and to other current and potential clients of his firm, about the amount of money the firm managed.
While trying to win its business, Tandon falsely told CalPERS that his firm satisfied its minimum AUM requirements—a metric often used by institutional investors to gauge prospective investment advisors. In May of 2008, knowing that his firm did not meet CalPERS’s minimum requirements for AUM, he specifically told CalPERS that Simran not only met explicit AUM requirements but also managed at least $200 million as of Dec. 31, 2007. Simran’s AUM fell considerably short of that figure, coming in at approximately $80 million at the time. The ruse worked, and Tandon won the business from CalPERS, thanks to his lies, according to the SEC.
With CalPERS under Simran’s belt, Tandon then went after other prospective clients with an inflated AUM figure. From 2008 to 2011, he also cited the firm’s relationship with CalPERS as an additional selling point, and instructed the firm’s employees to do likewise. He went on to report an inflated AUM in his firm’s SEC filings, multiple times, then later attempted to mislead SEC examiners during a routine examination of Simran.
Simran ceased operations after withdrawing its advisor registration in February 2012. Tandon, now living in Texas, has agreed to settle the SEC’s charges, although he has neither admitted nor denied the findings. Part of the settlement includes disgorgement of $20,018, prejudgment interest of $1,680, and a penalty of $100,000. Scott Reiman Agrees to Pay $900,000 in Insider Trading Case
Scott Reiman, founder and president of the Denver-based investment firm Hexagon has been charged by the SEC with insider trading based on information he received from Roger Parker, then CEO of Delta Petroleum.
Delta had secured a $684 million investment from private investment firm Tracinda, and before it made the news public, Parker passed along information about the deal to Reiman, who proceeded to take advantage of it by buying Delta Petroleum stock or highly speculative options on three separate occasions. Once the announcement was officially made, Delta stock gained almost 20%, and Reiman made a hefty profit.
While he neither admitted nor denied the charges, Reiman has agreed to pay disgorgement of $398,000 plus prejudgment interest of $93,567 and a penalty of $398,000, as well as submit to other penalties.
Parker was previously charged for his own actions, as was insurance executive Michael Van Gilder, who also took advantage of information passed along by Parker to trade for his own gain.