The SEC filed and settled two cases this week in which insiders tipped family members about events at publicly traded companies. In both cases, the insider and the tippees settled with the Commission, paying far more than any profit earned.
• On Tuesday, May 8, 2012, the SEC filed a case against Mohammed Mark Amin, a Hollywood movie producer, and his brother, cousin, and three other friends and business partners for insider trading in the shares of DuPont Fabros Technology Inc., a company in which Mr. Amin served on the board of directors. Those who traded earned approximately $618,000, but the six defendants settled by paying nearly $2 million.
• On Monday, May 7, 2012, the Commission filed a case against Angela Milliard, a former paralegal at Semitool Inc., a semiconductor company in Montana, and her father for trading on inside information about the 2009 acquisition of the company. The daughter and father (who earned $67,000) agreed to settle the SEC’s case by paying more than $175,000.
The Hollywood Executive. The SEC described Mr. Amin as "a motion picture executive," who was "the producer or executive producer for more than 75 Hollywood movies including Frida, Eve’s Bayou, and four movies in the Leprechaun series." The SEC claims that, prior to a company board meeting, Mr. Amin learned about three new leases that DuPont Fabros was negotiating and three loans it was obtaining to develop new facilities. Mr. Amin learned this information when he received materials for a special board meeting to approve the three new loans.
Mr. Amin tipped his brother, his cousin, and a long-time friend and business manager. Those three traded on the basis of the inside information, and his brother tipped two friends and business associates. The group made more than $618,000 in insider trading profits when the company’s share price rose 36 % after an earnings release disclosed the development of these new facilities.
The six defendants agreed to settle the SEC’s charges by collectively paying almost $2 million (consisting of disgorgement of $618,497, prejudgment interest of $78,000, and penalties totaling $1,236,994). They also agreed to the entry of a final judgment permanently enjoining them from violating Section 10(b) of the Exchange Act and Rule 10b-5. Mr. Amin agreed to a 10-year bar from serving as an officer or director of a public company.
The Montana Paralegal. In 2009, Ms. Milliard learned that Semitool and Applied Materials Inc., a Silicon Valley company, had entered into advanced merger negotiations, which would result in a the tender offer for nearly 30 % more than Semitool’s price at the time. The Commission alleged that she wired money to her boyfriend’s brokerage account and used it to purchase Semitool shares. She also provided her father Kenneth Milliard with information about the negotiations. He then purchased shares and tipped his sons, who also acquired shares. After Applied’s acquisition of Semitool was announced, the Milliards sold their shares, earning profits of more than $67,000.
The daughter and father agreed to settle with the Commission by paying more than $175,000. Ms. Milliard will disgorge her profits of $20,355, and pay prejudgment interest of $1,614 and a penalty of $54,022. Her father will disgorge both his and his sons’ profits of $47,805, and pay prejudgment interest of $3,765 and a penalty of $47,805.