Published on Feb 28th, 2023 |

The SEC Charged a Former Private Equity Consultant and his Friend with Insider Trading

SEC Releases

Brief Introduction

The SEC charged a former consultant for a Private Equity Firm, and his close friend, with insider trading on February 22nd, 2023.

These charges resulted from actions taken in April of 2018.

What Happened? (According to the SEC)

What Happened? (According to the SEC)

  • A Private Equity Firm was planning to announce an acquisition of another company.
  • The consultant gave a tip to a close friend, who performs business as a day trader and an accountant, ahead of the public announcement in April of 2018.
  • Because of this tip, the friend purchased 60,000 shares of stock over a period of four days and sold the entire holding the day after the acquisition announcement.
  • The profit from trading totaled around $300,000.
  • The SEC is seeking permanent injunctions, civil penalties, and officer-and-director bars for both defendants.

Vigilant's Final Conclusion

Vigilant’s Final Conclusion

Insider trading is a serious offense that will bring significant penalties from the SEC, and other Federal Agencies.

As discussed in the 2023 SEC Examination Priorities, Private Equity firms will be a focus of the SEC. As a result, Private Equity Firms should have policies and procedures to monitor, test, and educate on the receipt of material non public information and illegal trading practices.

Specific to this Alert, it relates to this SEC Charge, there are two areas Vigilant focuses on when it comes to the compliance requirements and risks specific to managing Private Equity Funds:

  1. Adequately disclosing and supervising Strategic Advisors and Operating Partners, or other individuals who provide solutions to the Funds or Portfolio Companies, but who are not employees.
  2. Providing proper training and oversight over employees and establishing written policies and procedures designed to prevent the misuse of Material Non-Public Information.

Our team of experienced compliance professionals have extensive experience in managing and supporting the compliance programs of Private Equity Advisers.

If you have any questions or would like learn more about Vigilant and our Private Equity Compliance Solutions, click the button below.

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