The Securities and Exchange Commission today charged a father, son, and friend in Northern California with insider trading in advance of a merger of health care companies based on confidential information the father learned from a close friend working at one of the companies.
The SEC alleges that John McEnery III breached a duty of trust and confidence owed to his friend when he traded and tipped others to trade in the stock of Clarient Inc. upon learning about its impending acquisition by GE Healthcare. McEnery tipped his son John McEnery IV as well as Michael Rawitser, a longtime friend of McEnery III. Following the public announcement of the acquisition, Clarient’s stock price rose by 33 percent and the trio profited by a total of more than $50,000.
The McEnerys and Rawitser agreed to pay approximately $170,000 combined to settle the charges.
“Individuals who obtain confidential information through a relationship of trust with a corporate insider are prohibited from using that information to trade securities,” said Joseph G. Sansone, Acting Co-Chief of the SEC’s Market Abuse Unit. “These traders violated such a trust by using highly-sensitive information to reap illicit trading profits.”
Without admitting or denying the allegations in the SEC’s complaint filed in federal court in San Jose, McEnery III agreed to pay disgorgement of $32,482, prejudgment interest of $4,919.25, and a penalty of $64,156; McEnery IV agreed to pay disgorgement of $3,288, prejudgment interest of $497.92, and a penalty of $3,288; and Rawitser agreed to pay disgorgement of $28,386, prejudgment interest of $4,081.87, and a penalty of $28,386. The settlement is subject to court approval.
The SEC’s investigation was conducted by Elena Ro and supervised by Steven D. Buchholz of the Market Abuse Unit in the San Francisco Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.