Insider trading has the attention of the U.S. Securities and Exchange Commission (SEC), as their litigation record proves, but a related settlement announced last week included a couple of firsts.
The other “first” is the Commission’s use of a deferred prosecution agreement with an individual (as opposed to an entity) who provided significant cooperation that aided the SEC in making its case against a number of other defendants and a measurable reduction in penalties for others who likewise cooperated.
“Although [the senior executive’s] tips spun a web of illegal trading, some of the downstream tippees substantially assisted in our investigation while others hindered it,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement.
The reduction in penalties for those tippees who assisted us, together with the non-prosecution agreement for one of the traders, demonstrate the benefits of cooperating with our investigations. The increased penalties for others highlight the risks of impeding our work.
Prosecution Score Card
“Cooperation helps” (or, “impede our work at your peril”), is a conclusion one can draw from the outcomes in this case:
|Top Corporate Executive / no cooperation||
|Second Tier Executive / cooperation||
|Second Tier Executive / no cooperation||
|Third Tier Executive / no cooperation||
|Profiteer’s Tipster / no cooperation||
|Unnamed Individual / material cooperation||
Those who cooperated escaped without a penalty or skipped being prosecuted altogether.