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Volume XII, Number 26

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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).

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume IV, Number 206
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About this Author

Michael Rosensaft, white collar criminal litigator, Katten, New York Law Firm
Partner

Michael M. Rosensaft focuses his litigation practice on representing individuals and businesses in white collar criminal matters, regulatory enforcement matters, corporate internal investigations, insurance and health care fraud and complex civil litigation.

Prior to joining Katten, he served as an Assistant US Attorney for the Southern District of New York. In that capacity, Michael oversaw the investigation and prosecution of numerous criminal cases involving terrorism, international money laundering, export violations, bribery of foreign...

212-940-6631
Tenley Mochizuki, Katten Muchin Law Firm, Litigation Lawyer
Associate

Tenley Mochizuki concentrates her practice in litigation and dispute resolution matters.

While attending law school, Tenley participated in the Advocacy for the Elderly Clinic and worked on the Virginia Environmental Law Journal. Before joining the firm, she worked in a medical office, a primate cognition laboratory and various nonprofit organizations.

212-940-8568
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