Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> OverRegd - Securities Regulation and Litigation Blog

Corporate & Securities Law

: OverRegd - Securities Regulation and Litigation Blog

Good Ol' Fashioned Insider Trading Still In Vogue

For the past two years, Ponzi schemes have dominated the news headlines.  In fact, it still seems like a new scheme is being uncovered every week.  But what about insider trading?  Insider trading cases haven't received much press lately, but things may be changing.

Yesterday, the SEC announced it was charging Vinayak S. Gowrish and Adnan S. Zaman, two former employees of "global firms" in a "serial insider trading scheme" in which the two men "stole confidential information from their firms in connection with five deals and tipped two friends in exchange for kickbacks ... and made nearly $500,000 in illicit profits. The SEC also charged the two "friends" with fraudulent trading based upon the material, non-public information they allegedly received from the tippers Zaman and Gowrish.  According to the SEC's complaint, three of the four individuals were fraternity brothers and the fourth was a friend.

Perhaps taking a lesson from movie and TV dramas discussing these types of situations, the alleged schemers utilized a relatively low tech way of communicating the information to one another to evade detection - yellow "post it" notes and in-person discussions.  Moreover, the SEC alleges the unlawful trades were purposefully kept small to avoid detection by regulators.  Of note, in the same press release announcing the filing of its complaint, the SEC also announced that it had settled with three of the four men, and is still "seeking permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the imposition of sanction against Gowrish."

While in the grand scheme of things this may seem like a run of the mill insider trading case, it begs the question - how did these alleged unlawful activities come to light?   One would think that the yellow "post it" notes, in-person meetings and other non-tech methodology discussed in the SEC's complaint would make it highly improbable that such a relatively small purported insider trading scheme would be detected.  This case may be one to follow for this reason alone.

Stay tuned....

Full post as published by OverRegd - Securities Regulation and Litigation Blog on December 17, 2009 (boomark / email).