Risk & Compliance

SEC’s Insider-trading Pace: Quickening?

In one action, the commission settled a case with a former law-firm partner who allegedly learned of an upcoming corporate acquisition while interv...
Stephen TaubJune 14, 2007

In what seems to be a recently stepped-up focus on insider trading, the Securities and Exchange Commission announced the settlement of two such cases on Wednesday.

In one of the actions, the SEC settled a case with former law firm partner who got wind of a forthcoming corporate acquisition while he was interviewing the company’s legal chief for a job. The commission filed a settled civil injunctive action against David A. Schwinger, an attorney and former managing partner of Katten Muchin Rosenman LLP’s Washington, D.C. office. Schwinger had been charged with trading shares of Vastera, Inc. on the basis of material, nonpublic information that an acquisition of the company was in the wings.

The complaint alleged that Schwinger learned of the impending merger while interviewing Vastera’s chief counsel, who was then seeking to be hired by KMR as a partner. In responding to Schwinger’s inquiries during the interview about the chief counsel’s reasons for leaving Vastera, the official allegedly disclosed to Schwinger that Vastera’s acquisition was imminent.

Without admitting or denying the commission’s allegations, Schwinger agreed to settle by consenting the entry of a final judgment that requires him to disgorge $13,027 in illicit gains and $1,940 in prejudgment interest and to pay a civil penalty of $26,054.

In the other action, the regulator settled charges against Joseph Galamb for engaging in unlawful insider trading in the securities of Hudson United Bancorp. The complaint alleged that Galamb, a former Hudson United Assistant Vice President, bought securities of the company on the basis of material, nonpublic information concerning an impending acquisition of Hudson United by TD Banknorth, Inc.

Without admitting or denying the allegations, Galamb consented to the entry of a final judgment that permanently bars him from engaging in the violations and orders him to pay disgorgement of $7,125, plus prejudgment interest of $412, and a civil penalty of $7,125.

The SEC, which has likely filed more than a dozen insider-trading cases this year, doesn’t disclose exact figures of its enforcement actions during the year. In 2006, the commission took 46 insider-trading enforcement actions, down from 50 the prior year, but way up from 42 in 2004, according to the regulator.

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