SEC Charges Investment Bank Junior Analyst with Insider Trading

The Securities and Exchange Commission (“SEC”) charged 23-year-old junior analyst Bill Tsai at an international investment bank with insider trading.

Tsai, who worked at the bank’s New York office, allegedly learned in March 2019 that an affiliate of private equity firm Siris Capital Group intended to acquire Electronic for Imaging, Inc. (EFI) (NASDAQ: EFII) when Siris consulted with the bank for financing advice on the transaction.

Read the SEC Press Release Here.

The analyst, who was responsible for creating and circulating a confidential internal document called the “pipeline report,” began including the information about the Siris Captital Group plans and its expected close date in his March 13 pipeline report.

Tsai purchased 187 EFII call options between March 29 and April 12, 2019, spending a total of $28,410. He had never previously traded EFII securities, and the purchase was his largest personal investment in any stock option.

EFI, a global technology company based in Freemont, Calif., published a press release announcing the $1.7 billion cash deal on April 15, 2019, sharing that the purchase price of $37.00 per share in cash, a 45 percent premium over the company’s 90-day-volume-weighted average price ended on April 12, 2019.  Tsai then sold all of the options for $127,160, a $98,750 profit. 

The SEC charges allege that Tsai violated the antifraud provisions of the federal securities laws. The Commission seeks disgorgement of ill-gotten gains plus interest, penalties and injunctive relief in its ongoing investigation.

The SEC compliant shows that Tsai received five separate company trainings between the time he joined the company as an intern in July 2017 and November 2018. Those trainings, as well as his offer letter and other documents he received from the firm, informed Tsai that he potentially would be privy to information including potential mergers, acquisitions and restructurings, and explicitly explained his duty to maintain confidentiality and refrain from using non-public information in any type of securities transactions.                                                                                          

Tsai’s employer further required that its employees disclose all brokerage accounts, complete all trades through one of the company’s approved list of broker-dealers, and submit any planned securities trades for pre-approval through the bank’s compliance department. Though Tsai acknowledged receipt and knowledge of these policies, he allegedly attempted to hide his illegal activity from his employer by specifically marking ‘No’ on a document asking if he owned any unauthorized brokerage accounts, concealing all of his transactions from his employer.

In addition to the SEC charges, Tsai is also being charged criminally by the U.S. Attorney's Office for the Southern District of New York.

How to Prevent Insider Trading at Your Firm

The SEC requires that firm policies and procedures be reasonably designed to prevent insider trading.  This includes educating associated persons about what insider trading is and how to prevent it.  

Jacko Law Group, PC can assist your firm in developing or reviewing your compliance team’s trainings, as well as assess supervisory controls, employee acknowledgement forms, forensic tests and other documents to help ensure that your employees are well versed about how to prevent insider trading and handle confidential non-public information if it comes into one’s possession. Contact the attorneys at Jacko Law Group, PC, to learn more about our services. Let our experience work for you.

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