Risk & Compliance

SEC Charges Attorney With Insider Trading Tied to Merger

Pennsylvania attorney bought shares prior to an insurance industry merger after learning about the deal from a legal assistant.
Katie Kuehner-HebertJuly 20, 2015
SEC Charges Attorney With Insider Trading Tied to Merger

The Securities and Exchange Commission has charged Pennsylvania attorney Herbert K. Sudfeld with insider trading ahead of the 2011 deal announcement between Harleysville Group and Nationwide Mutual Insurance.

Sudfeld at that time was real estate partner at a law firm that advised Harleysville on the $760 million merger, according to the SEC’s compliant. After overhearing a conversation between an attorney working on the transaction and their shared legal assistant that the deal between the insurance companies was imminent, Sudfeld purchased Harleysville stock in his and his wife’s accounts, the SEC alleged. Harleysville’s stock price soared 87% when the merger of the two insurance companies was announced in September 2011, after which Sudfeld sold all the shares he had bought, realizing roughly $79,000 of illegal profits.

“We allege that Sudfeld breached his duties of trust and confidence owed to his law firm when he misappropriated information about the merger to enrich himself,” Daniel M. Hawke, chief of the SEC’s division of enforcement’s market abuse unit, said in a press release.  “The commission will continue to aggressively pursue attorneys and other professionals who abuse their access to confidential information.”

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The SEC’s complaint filed in federal court in Philadelphia names Sudfeld’s wife, Mary Jo Sudfeld, as a relief defendant for the purpose of recovering insider trading profits in her brokerage account through trades conducted by Sudfeld.

The complaint charges Sudfeld with violating antifraud provisions of the federal securities laws and an SEC antifraud rule. The SEC seeks a permanent injunction and financial penalties against Sudfeld and return of allegedly ill-gotten gains and prejudgment interest from Sudfeld and Mary Jo Sudfeld.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania Thursday announced criminal charges against Sudfeld, the SEC said.

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