The Securities and Exchange Commission today announced that a Silicon Valley executive has agreed to pay more than a half-million dollars to settle charges that he traded on inside information received from a board member at a Minnesota-based company that was trying to solicit a competing bid in advance of a merger.
The SEC alleges that Peter D. Nunan was contacted by the board member at FSI International and confidentially informed that a Japan-based semiconductor equipment company called Tokyo Electron Ltd. was negotiating to acquire FSI. The board member knew that Nunan, a senior engineering executive at a subsidiary of a semiconductor equipment manufacturer named Screen Holdings Company, knew the executive responsible for evaluating potential corporate acquisitions at Screen Holdings. Nunan thereafter acted as a conduit for communications between the two companies as FSI sought a competing bid.
According to the SEC’s complaint filed in federal district court in San Jose, Calif., Nunan misused the confidential information entrusted to him about FSI’s potential merger plans and bought 105,000 FSI shares during the next six months. He also recommended the trade to his brother, who purchased 1,000 shares of FSI stock. Once Tokyo Electron and FSI publicly announced a merger agreement on Aug. 13, 2012, Nunan sold most of his FSI stock the next day and the illicit profits from his unlawful trading and tipping totaled $254,858.
“Corporate insiders must act with the highest degree of ethics and integrity, and it is simply unacceptable when they abuse their access to sensitive information in an attempt to line their own pockets,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement.
The SEC’s complaint charges Nunan with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. Without admitting or denying the allegations, Nunan agreed to be permanently enjoined from future violations and ordered to pay $254,858 in disgorgement of ill-gotten gains plus interest of $24,587 and a penalty of $254,858 for a total of $534,303.
The SEC’s investigation was conducted by Darren E. Long and Daniel A. Weinstein, and supervised by Brian O. Quinn.
Among other recent examples of SEC cases charging a corporate insider with insider trading:
- Another Silicon Valley corporate insider agreed to settle charges that he was part of a ring of four men trading on confidential information he obtained ahead of corporate news announcements while working in finance at two public companies.
- An electronics company executive allegedly traded on nonpublic information he learned on the job ahead of the company’s release of FY 2014 first quarter earnings.
- A biotechnology company’s senior director of information technology agreed to settle charges that he illegally tipped his brother-in-law with nonpublic information in advance of two pharmaceutical trials, a licensing agreement for a cancer drug, and eventually the acquisition of the company.