May 16, 2013
May 16, 2013 — When traders abuse insider information about an impending merger or acquisition, employees of the companies involved or within the securities industry are quite likely to find out about it. The Securities and Exchange Commission (SEC) now has a whistleblower program that allows them to do something about it. Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010, the program permits the SEC to compensate tipsters with up to thirty percent of the amount the government receives as a result of the whistleblower’s information, provided the amount collected is in excess of $1 million.
A California hedge fund has been charged with trading on insider information concerning the impending merger of two technology companies. Also charged in the $29 million scheme are the company executive who passed the information along and another trader.
Matthew Teeple is a hedge fund analyst in San Clemente, California. In July 2008, Teeple learned that Foundry Networks Inc. was going to be acquired by Brocade Communication Systems Inc. in a $3 billion deal. The tip came from David Riley, Foundry’s chief information officer, to whom Teeple had provided investment advice in the past.
Teeple went straight to his colleagues at the San Francisco firm where he works. Within minutes, the firm’s hedge funds purchased massive quantities of Foundry shares prior to the public announcement, causing them to make millions of dollars when the news of Foundry’s acquisition went public on July 21 and Foundry’s stock price soared 32 percent.
In addition, Teeple shared the tip with John Johnson, Teeple’s friend in Denver, who also used the information to make illegal trades.
Securities industry employees and company insiders who discover insider trading schemes need to become aware of their own rights under the Dodd-Frank Act. Government collaborators seeking to maintain their anonymity, for instance, are not allowed to notify the SEC directly. They must act through an attorney. The securities fraud lawyers at Waters & Kraus have the experience to protect tipsters in insider trading cases. Contact us by email or call our whistleblower lawyers at 800.226.9880 to learn how we can maximize and secure your interests.
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