When it comes to securities law violations, people tend to think that the SEC only goes after big fish, but that is plainly not true. We mentioned in our previous blog series on exempt offerings (available here) that there is no exception for small guys. We also looked at the SEC’s broken windows enforcement policy (available here and here), under which the agency vows to pursue all types of violations, big and small. Insider trading, in particular, seems to be an area where seemingly ordinary people get caught often, after mistakenly believing that their small-scale violations and private (sometimes coded) communications would go unnoticed. If caught, however, penalties for insider trading can be quite severe, ranging from injunction, disgorging of profits, and treble damages, to the maximum prison sentence of 20 years and the maximum criminal fine (for individuals) of $5,000,000.
In July 2014, the SEC filed a complaint against Eric McPhail and a group of his friends, most of them golfing buddies, alleging that they made more than $554,000 of illegal profits from trading on inside information about American Superconductor Corporation (“AMSC”), a publicly traded company.[1] In June 2015, a parallel criminal case resulted in McPhail’s conviction of criminal charges of conspiracy and securities fraud for his role in the insider trading ring. [2]
This will be a two-part blog series. We will look at the details of the SEC’s allegations against McPhail and the golfing buddies in our next post.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or <a ” ” target=”_blank” href=”http://www.rshawnmcbridelaw.com”>www.mcbrideattorneys.com.
[1] See generally SEC v. McPhail, Civil Action No. 1:14-cv-12958 (D. Mass. July 11, 2014).
[2] SEC, Litigation Release No. 23289: Jury in Criminal Case Convicts Insider in Insider Trading Case Involving Group of Amateur Golfers (June 17, 2015), https://www.sec.gov/litigation/litreleases/2015/lr23289.htm.