Risk Management

SEC: Small Insider Trades Get Caught, Too

The commission alleges that the former vice president of treasury of Restoration Hardware, along with friends, acted on information in advance of a...
Stephen TaubOctober 7, 2008

A former vice president of treasury at Restoration Hardware settled Securities and Exchange Commission civil insider-trading charges that he tipped three friends to the company’s pending acquisition, the SEC said.

The friends made more than $900,000 in unlawful profits after public announcement of the subsequent merger caused the stock price to soar, according to the commission. It alleged that Ciriaco Rivor, the ex-vice president at the national home furnishing retailer, learned in mid-2007 that the company was about to be acquired by a private equity firm at a substantial premium. Rivor allegedly passed the confidential, nonpublic information to friends Emmanuel Axiaq and Steven Lusardi, according to the SEC.

The SEC alleged that Rivor instructed his friends to limit the size of their Restoration Hardware stock purchases to prevent detection.

“This case makes clear that attempts to ‘stay under the radar’ by trading in small quantities by no means ensures that traders will avoid detection and prosecution,” said Marc J. Fagel, regional director of the SEC’s San Francisco office.

According to the SEC’s complaint, Emmanuel Axiaq and Lusardi complied with Rivor’s instruction to limit the size of their stock purchases, but others who received information did not.

Rivor was promoted to the vice president post in October 2007. He previously had been director of financial planning at Good Guys Inc.

Rivor, Lusardi, and Emmanuel Axiaq agreed to settle the SEC’s charges without admitting to or denying the allegations. Rivor, who did not personally trade on the information, agreed to pay a $68,000 penalty. Lusardi agreed to pay a total of $8,901, including disgorgement of his trading profits, prejudgment interest and a penalty equal to his trading profits. Emmanuel Axiaq agreed to pay a total of $90,249, including $30,249 in disgorgement of his trading profits and prejudgment interest and a penalty of $60,000.