Tuesday, October 7, 2014

More on Law Firm Insider Trading


Updated and new stories to share on this topic. First: "Napkin-Eating Middleman in Law Firm Insider Trading Case Pleads Guilty" --
  • "A Brooklyn mortgage broker who prosecutors said was the napkin-eating middleman in an insider-trading ring has pleaded guilty to his role in the alleged scheme, which involved stock tips supplied by an employee at Simpson Thacher & Bartlett LLP, a prominent New York law firm."
  • "Prosecutors said that Mr. Tamayo was the conduit for insider-trading tips that former Simpson Thacher managing clerk Steven Metro, a friend of his from law school, gleaned from the firm’s computer system."
  • "The case highlighted the internal risks that law firms face when safeguarding their clients’ confidential information. A lawyer for Mr. Tamayo said in an email, 'We cannot comment except to say that on Friday Mr. Tamayo took the first step in the process of accepting full responsibility for his actions.'"
Followed by: "Insider-trading case makes fine plot for a movie" --
  • "In an interesting case that reads like a movie script, the Securities and Exchange Commission last week charged a managing clerk at a major top-of-the-line New York law firm with violating insider-trading laws."
  • "The alleged scheme seemed to have started innocently enough. The law clerk was having drinks with friends in a bar in New York City in early February 2009."
  • "MM was concerned that a stock he owned would decline, and worse, he was afraid the company would go bust. The clerk knew that would not happen. At work, he had access to the law firm's computer system. He had seen documentation of an upcoming deal that would infuse $500 million into the ailing company, officials said."
  • "When MM realized this information would be positive for the stock, instead of selling the stock, he called his broker to buy more, it is alleged."
  • "'Law firms are sanctuaries for the confidential treatment of client information, and this scheme victimized not only a law firm but also its corporate clients and ultimately the investors in those companies,' said Daniel M. Hawke, chief of the SEC Enforcement Division's Market Abuse Unit. 'We are continuing to combat serial insider-trading schemes, particularly by law-firm employees and other professionals who are entrusted with extremely sensitive market-moving information.'"
And finally, news from Canada: "Insider Trading Case Considers Materiality Of Confidentiality Agreement And Expired Unsolicited Offer" --
  • "The British Columbia Securities Commission (BCSC) recently considered whether a consultant for a law firm had committed insider trading and breached the public interest when she traded a client's shares with knowledge of undisclosed facts."
  • "In Weiqing Jane Jin, 2014 BCSECCOM 194, there was no question that the consultant was in a special relationship with the issuer client and had traded while in possession of facts that had not been disclosed.  The materiality of these facts was contested."

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