Among recent enforcement actions by the SEC were charges against two ex-Wells Fargo employees—an analyst and a trader—for insider trading ahead of ratings changes and against two individuals for insider trading ahead of a hedge fund manager’s announcement about Herbalife. The third SEC action went against two Florida men for fraud in connection with a proposed television network.
In addition, Massachusetts has charged tax advisor John Patrick Horan and his firm with fraud and warned of a telephone scam targeting the Brazilian community.
SEC Charges Two Former Wells Fargo Employees With Insider Trading
Gregory Bolan Jr. and Joseph Ruggieri, two former employees of Wells Fargo, were charged by the SEC with insider trading ahead of ratings changes that Bolan, a research analyst, was going to make in reports that had not yet been released.
According to the agency, Bolan tipped Ruggieri, a Wells Fargo trader, along with another friend now deceased, before Bolan released reports that contained market-moving ratings upgrades or downgrades for certain securities. Ruggieri made more than $117,000 on the tips; the other friend, before his death, made about $10,000 on three ratings changes Bolan told him about in advance.
Ruggieri’s trades based on the tips were atypical for his normal trading patterns, according to the SEC, either buying the stocks ahead of an upgrade or buying short positions ahead of a downgrade and selling his overnight positions the next day after the information went public. He made money from these atypical trades on six of Bolan’s eight reports from April 2010 to March 2011 that contained ratings changes.
The administrative proceeding will determine any relief against Bolan and Ruggieri, including disgorgement of ill-gotten gains, prejudgment interest, financial penalties and other remedial measures.
(See Bloomberg View columnist Matt Levine’s take on this case, Research Analyst Told Trader What Stocks to Buy.)
Two Charged With Insider Trading on Herbalife
Filip Szymik of New York and Jordan Peixoto of Toronto were charged by the SEC with insider trading on the news that the hedge fund manager Pershing Square Management was taking a short position on Herbalife.
According to the agency, Szymik learned of the impending announcement of the short from his rommate, a Pershing Square analyst at the time. Szymik tipped Peixoto, who then purchased Herbalife put options on Dec. 19, 2012, the day before the announcement. As a result, Peixoto made $47,100 in illicit profits.
Szymik has settled with the SEC and has been ordered to cease and desist from further violations and pay a $47,100 civil penalty. Peixoto faces litigation that will determine violations and appropriate relief.
The roommate was not named in the SEC statement.
Phony TV Station Startup in Florida Leads to SEC Fraud Charges