Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Wednesday, April 9, 2014

SEC Charges Two Friends With Insider Trading of Chicago Bridge & Iron l Securities Lawyer 101 Blog

On April 4, 2014, the Securities and Exchange Commission charged two friends with insider trading on confidential information from an investment banker about an impending transaction between engineering and construction companies.
 
The SEC alleges that Walter D. Wagner of Rockville, Md., and Alexander J. Osborn of Alexandria, Va., illicitly profited by nearly $1 million combined by trading on nonpublic information in advance of the acquisition of The Shaw Group by Chicago Bridge & Iron Company.
 
Wagner was tipped by his longtime friend John W. Femenia, who worked at a firm that was considering whether to finance the transaction.  Wagner then tipped Osborn with the inside information so they could each trade heavily in Shaw Group securities ahead of the public announcement on July 30, 2012, when the closing stock price jumped approximately 55 percent from the previous day.
 
Wagner has agreed to settle the SEC’s charges by disgorging his ill-gotten gains plus interest.  Any additional financial penalty will be decided by the court at a later date.  A parallel criminal action against Wagner was announced today by the U.S. Attorney’s Office for the Western District of North Carolina.
 
The SEC’s litigation continues against Osborn.  The SEC already charged Femenia in a related insider trading case.  He was subsequently barred from the securities industry.
 
“Wagner and Osborn had never bought stock or call options in The Shaw Group, yet they suddenly spent significant portions of their available cash resources to make sizeable purchases in the weeks preceding the public announcement of the acquisition,” said William P. Hicks, associate director for enforcement in the SEC’s Atlanta Regional Office.  “The SEC is committed to deciphering the stories behind suspicious trades and exposing those who trade on confidential information obtained from corporate insiders.”
 
According to the SEC’s complaint filed in federal court in Greenbelt, Md., all three attended the U.S. Merchant Marine Academy.  Wagner and Femenia met in college and remained friends after graduating in 2003.  Osborn, who graduated in 2006, became friends with Wagner around 2009 when they worked in the same office building for different government contractors.  The SEC alleges that Femenia collected nonpublic details about the acquisition while at work and communicated them to Wagner via text messages and phone calls in violation of the duty he owed his firm to keep the information confidential.  Wagner knew Femenia was employed in investment banking at Wells Fargo Securities.  Wagner in turn tipped Osborn, who knew that Wagner’s source was employed in the finance industry.  Wagner and Osborn used the nonpublic information to obtain illegal trading profits of approximately $517,784 and $439,830 respectively.
 
The SEC’s complaint charges Wagner and Osborn with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the financial sanction of $528,175 in disgorgement and prejudgment interest, Wagner has consented to the entry of a judgment permanently enjoining him from violations of Section 10(b) of the Exchange Act and Rule 10b-5.
 
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com

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