The U.S. Securities and Exchange Commission alleges that Gregory T. Bolan Jr. tipped trader Joseph C. Ruggieri ahead of market-moving ratings upgrades or downgrades that he made in certain securities. The commission claims that this information allowed the latter to realize profits of over $117,000.
The SEC alleges that Mr. Bolan also tipped a friend with nonpublic information and he was able to make around $10,000. The SEC did not charge the third person as he has died since his alleged impropriety. At the time of the alleged wrong doing, the three analysts were employed at Wells Fargo & Co (NYSE:WFC).
The SEC Statement
“Bolan gave two traders a sneak preview into his coming ratings changes and provided them an unfair and illegal advantage on the rest of the markets,” said Daniel M. Hawke, chief of the SEC Enforcement Division’s Market Abuse Unit, in prepared remarks. Wells Fargo has yet to comment on the charges.
From April 2010 to March 2011, Mr. Bolan published eight research reports with a ratings change or initiation of coverage with an “outperform” or “underperform” rating, said the SEC. The charges today allege that R. Ruggieri traded profitably ahead of six of these reports citing a divergence from his typical trading pattern.
Top value fund managers are ready for the small cap bear market to be done
During the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More
The stocks he allegedly traded were Parexel International Corp., Covance Inc., Albany Molecular Research Inc., AthenaHealth Inc., and Emdeon Inc.
Lawyer denies the charges
However, a lawyer for the defendants said that his clients “vehemently deny” the charges and suggests the fact that the SEC charged the two in its in-house court rather than federal court shows the weakness in the case against the two.
“The SEC knows that it has serious weaknesses in its case, and that is why it is choosing to bring this as an administrative proceeding instead of trying this case in a federal court,” said Sam Lieberman, an attorney with Sadis & Goldberg LLP.
The charges come a week after the SEC stated that Wells Fargo had a agreed to pay $5 million in penalties to settle a charge that another former broker engaged in insider trading ahead of Burger King Worldwide Inc’s buyout in 2010. According to the SEC, Wells Fargo admitted wrongdoing with regard to that case.