Legal News

Small-Time Insider Trading ? How Often Does it Happen?

By Dan Slater

Recently we’ve been focusing on big-ticket items, like the implosion of a $1.6 billion hedge fund. How about a little insider-trading case to lighten up our Friday afternoon?

According to a report on Dow Jones Newswires (link unavailable), the SEC said today that it filed an insider-trading complaint against Adrian P. Di Vita, a former manager at Williams-Sonoma. (LB Note: Great products, but a bit overpriced. For those LB’ers who live in NYC, we recommend Bowery Kitchen Supplies, located, counter-intuitively, in Chelsea Market on West 16th Street.)

Allegedly, at management meetings Di Vita received material non-public information that Williams-Sonoma would lower its earnings guidance ahead of a 2006 press release. In possession of that inside info, Di Vita sold stock and bought put options ahead of the stock price drop associated with the lower guidance.

Di Vita, who didn’t admit or deny the SEC’s allegations, offered to settle the action and consented to a judgment ordering him to pay $76,933 in in disgorgement of ill-gotten gains, as well as a civil penalty of $67,690.

This case, we admit, is de minimis in practically every respect. But we’d like to raise the following question: How prevalent is this kind of thing, and what percentage of penny-ante insider trading by mid-level managers is actually caught by the SEC?

Full post as published by Law Blog - WSJ.com on June 20, 2008 (boomark / email).