The Securities and Exchange Commission (SEC) announced it had settled charges against Brian Fettner, a Nevada resident, who illegally obtained and later made trades based on sensitive "insider" information he discovered while staying at the residence of a long-time friend, the general counsel of Cintas Corporation.
According to the allegations, Fettner, without the knowledge or permission of his host, viewed various documents pertaining to the possible acquisition of G&K Services Inc. by Cintas, and made illicit trades based on that information through the brokerage accounts of his ex-wife and a former girlfriend.
In addition, he convinced his father and another acquaintance to purchase G&K shares, resulting in a significant profit for those individuals as well.
When Cintas and G&K formally announced the merger on Aug. 16, 2016, G&K's stock value increased more than 17 percent, resulting in illegal profits for Fettner of more than $250,000.
The SEC alleged that Fettner violated Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, and he has consented, without admitting or denying the charges, to a final judgement that imposes a penalty of $252,995 and permanently enjoins him from further violations of federal securities laws.
Preventing Insider Trading at Your Firm
On the surface, it might seem that common sense alone would be sufficient to avoid insider trading violations and steer clear of trouble with regulatory authorities.
However, violations regarding the improper handling of sensitive information are frequent, indicating that firms need to take proactive measures to prevent improper trading based on insider information, whether intentional or unintentional.
Training on the Applicable Laws
The first step towards prevention of enforceable violations, including the misuse of insider information, is always knowledge of the applicable rules and regulations, which should be incorporated into the firm's internal policies and procedures.
Effective training programs must be implemented to educate all employees regarding the scope of the laws that define what is and is not insider information, and what information can and cannot be traded on.
For assistance in reviewing your firm's policies and procedures regarding insider trading, or in the development of effective training programs that educate your organization's members in the proper implementation of firm policies, contact the attorneys at Jacko Law Group, PC, here.
Let our experience work for you.
- Senior Associate
Mr. Boeche provides strategic legal counsel to investment advisers, broker-dealers, private funds and other financial professionals. Mr. Boeche advises clients on all aspects of formation, registration, and ongoing ...
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