Former SAC Trader Settles Insider Trading Case With SEC

The Securities and Exchange Commission today charged Ronald N. Dennis, a former analyst at SAC Capital Advisors, with insider trading based on nonpublic information that he obtained about a pair of technology companies. 

Former SAC Trader Settles Insider Trading Case With SEC

SAC’s Dennis settles insider trading charges

The SEC claims Dennis, of Forth Worth, Texas, was provided confidential details about impending announcements at Dell Inc. (NASDAQ:DELL) and Foundry Networks from two fellow hedge fund analysts and then traded on this information in front of at least two quarterly earnings announcements in 2008 and 2009.  “Dennis prompted illegal trades in Dell and Foundry stock and enabled hedge funds managed by SAC Capital and affiliate CR Intrinsic Investors to generate illegal profits and avoid significant losses,” an SEC statement reads. Dennis agreed to be barred from the securities industry and pay more than $200,000 to settle the SEC’s charges.

“Like several others before him at SAC Capital and its affiliates, Dennis violated the insider trading laws when he exploited confidential information about public companies, in this case Dell and Foundry, to unjustly benefit the firms and enrich himself,” said Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office.  “His actions have cost him the privilege of working in the hedge fund industry ever again.”

According to the SEC’s complaint filed in federal court in Manhattan, “Dennis received illegal tips about Dell’s financial performance from Jesse Tortora, who was then an analyst at Diamondback Capital.”  Tortora and Diamondback were charged in 2012 along with several other hedge fund managers and analysts as part of the SEC’s broader investigation into expert networks and the trading activities of hedge funds.

SAC’s Dennis generated $3.2 million in profit on one trade

The SEC also said Dennis separately received an illegal tip about the impending acquisition of Foundry from Matthew Teeple, an analyst at a San Francisco-based hedge fund advisory firm.  The SEC charged Teeple and two others last year for insider trading in Foundry stock.

Incriminating communication via text message:  “your welcome,”  “you da man!!! I owe you.”

Dennis generated nearly $3.2 million in profits for SAC through the trades.  The SEC notes that within minutes after one of the Dell announcements, Tortora sent an instant message to Dennis saying “your welcome.”  Dennis responded “you da man!!! I owe you.”

The SEC’s complaint also alleges Dennis was informed by Teeple in July 2008 about Foundry’s impending acquisition by another technology company.  Shortly after receiving the inside information, Dennis purchased stock for the hedge fund that generated approximately $550,000 in profits when the news became public.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com