SEC Settles Third-Party Insider Trading Claim Against New York Investor Relations Executive
The Securities and Exchange Commission recently announced a settlement with a partner at an investor relations firm who allegedly traded on inside information obtained through his representation of two companies.
According to the complaint filed on July 22, 2014 in the US District Court for the Southern District of New York, Kevin McGrath, a partner at Cameron Associates, obtained confidential information about Misonix Inc. and Clean Diesel Technologies, Inc. while he was helping prepare press releases for those companies. He then allegedly used that information to make trades that yielded a total of $11,776 profit.
More specifically, in early May 2009, McGrath discovered that Misonix expected to announce disappointing quarterly results. Shortly before the press release went public, McGrath sold all of his shares of Misonix. Because the price of Misonix dropped nearly 22 percent by market close the day after the announcement, McGrath was able to avoid losses of $5,400.
Conversely, McGrath purchased several shares of Clean Diesel after learning in May 2011 that the company planned to issue a press release about its receipt of nearly $2 million in product orders. Once the press release went public, Clean Diesel’s share price jumped 95 percent, and McGrath subsequently sold his shares for a profit of $6,376.
Without admitting or denying the allegations, McGrath agreed to pay disgorgement of $11,776 with prejudgment interest of $1,492, and a civil penalty of $11,776. McGrath also agreed to a permanent injunction against further violations of the securities laws, and a conduct-based injunction that permanently requires him not to trade in the stock of any issuer for which he or his firm performed any services within a one-year period. Should he or his firm want to sell any shares received as compensation for services performed, they must provide written notice to, and receive written authorization from, the issuer.
SEC v. McGrath, Case No. 14-CV-5483 (S.D.N.Y. July 22, 2014).