SEC Investigates California Insider Trading Ring

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Four individuals have been charged with insider trading by the Securities and Exchange Commission (“SEC”) in an alleged scheme involving two Silicon Valley-based companies.  Christian B. Keller (“Keller”), a financial analyst employed by Applied Materials, Inc. and later Rovi Corporation, is accused of using his access to confidential information about the companies to organize an insider trading ring. Keller, along with John Gray (“Gray”), allegedly enlisted Kyle Martin (“Martin”) and Aaron Shepard (“Shepard”) to participate by trading in their respective brokerage accounts. At the time Gray was an analyst at Barclays, Martin was employed at a Beverly Hills car dealership and Shepard worked as a car stereo installer.

The SEC alleges that while at Applied Materials, Inc. Keller used confidential information regarding a merger to trade ahead of Applied Materials acquisition of another company. Later, while at Rovie, it is alleged that Keller used confidential information regarding Rovi’s quarterly financial results to trade ahead of Rovi’s negative news announcements. The trades in question were executed in the accounts of Martin and Shepard and are thought to have generated $750,000 in illegal profits.

Gray and Keller tried to evade detection by trading in another person’s name, using prepaid disposable phones, and making structured cash withdrawals to share profits,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Despite their careful planning, we were able to detect the suspicious trading and effectively use our cooperation program to expose their nefarious scheme.”

The four have agreed to settle charges without admitting to wrongdoing and pay penalties of approximately $1.7 million. Gray has also been barred from the securities industry and from participating in penny stock offerings. Keller has been barred from serving as an officer or director of a public company for 10 years.

Please reference our Jacko Law Group, PC Legal Risk Management Tip Practical Considerations For Preventing Insider Trading to learn more about insider trading and practical steps to protect your organization.

For more information on this and other related subjects, please contact us at info@jackolg.com  or (619) 298-2880.

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Filed under Insider Trading, Investment Advisers, SEC, Securities and Exchange Commission

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