Business

SEC Charges Father and Son Serial Insider Trading Schemers

The Securities and Exchange Commission (SEC) filed a lawsuit against a father and son in New York, identified as Robert & Sean Stewart for allegedly committing serial insider trading schemes.

The U.S. Attorney’s Office for the Southern District of New York also filed criminal charges against the  Robert & Sean Stewart in a similar action.

SEC Charges Father and Son Serial Insider Trading Schemers

SEC allegations

Based on the complaint of the SEC, the Stewarts committed unlawful, serial insider trading schemes involving tips of material, non-public information in coded e-mail messages disguised as conversations about golf.

Sean Stewart is currently a managing director at a prominent investment bank. He tipped his father, Robert Stewart regarding nonpublic information of future mergers and acquisitions of clients at the investment banks where he worked over the past few years. The elder Stewart is a certified public accountant and a CFO at a technology company.

According to the SEC, Sean tipped his father regarding imminent mergers & acquisitions on at least six occasions between 2010 and 2014. Robert used the information to trade on his account and his friend’s account. He generated approximately $1.1 million in profits in four years.

Robert and his friend shared the illicit profits in the form of small cash payments to avoid detection. They also spread trades over numerous stock options series to prevent regulatory scrutiny.

The SEC also found that Robert and his trading partner discussed and tried to conceal their trading scheme using coded-email messages. An example of their code messages using golf terminology reads;

“Saw local story about high cost of golf reservations since a foreign company purchased all- even more expensive than imagined” and “might have an opportunity to play golf- but would need to book the reservation as soon as the office opens Tuesday morning.”

SEC has new tools to detect insider trading

Daniel Hawke, Chief if Market Abuse Unit, Division of Enforcement at the SEC said, “Serial insider traders assume a huge risk that we will not detect their pattern of trading and connect them to their source of confidential information.”

According to him, the SEC has “integrated new technological tools to quickly and easily identify relationships among traders and spot suspicious trading across multiple securities.”

The SEC accused Sean and Robert Stewart of violating the antifraud provisions of the federal securities laws.