Securities Exchange Act of 1934
Release No. 46873 / November 21, 2002
Investment Advisers Act of 1940
Release No. 2085 / November 21, 2002
Administrative Proceeding
File No. 3-10946
SEC Institutes Administrative Proceeding Against Arjun Sekhri Based on His Criminal Conviction and Entry of Injunction
The Securities and Exchange Commission today instituted an administrative proceeding against Arjun Sekhri ("Sekhri"), a former investment banker, based on the entry of an injunction against him in Securities and Exchange Commission v. Arjun Sekhri, et al., 98 Civ. 2320 (RPP) (S.D.N.Y.) and Sekhri's criminal conviction in United States v. Arjun Sekhri, 00 Cr. 236 (RPP) (S.D.N.Y.).
In the Order Instituting Public Administrative Proceedings Pursuant to Sections 15(b)(6) and 15B(c)(4) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 ("Order"), the Division of Enforcement alleges that, between July 1996 and January 1998, Sekhri was associated with Salomon Smith Barney, Inc. in New York, NY, a registered broker, dealer, municipal securities dealer, and investment adviser. According to the Order, on April 1, 1998, the Commission filed a Complaint in the United States District Court for the Southern District of New York charging Sekhri and others with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The Complaint alleges that, inter alia, Sekhri and those with whom he acted made total profits of approximately $2.5 million from their unlawful insider trading in the common stock and/or call options on the stock of (i) MCI Communications Corp. ("MCI"); (ii) Brooks Fiber Properties, Inc. ("BFP"); (iii) Carson Pirie Scott & Co., Inc. ("CPS"); (iv) Central and South West, Corp. ("CSW"); and (v) Southern New England Telecommunications Corp. ("SNET").
According to the allegations in the Order, on July 25, 2002, Judge Robert P. Patterson, Jr. entered a final judgment granting the Commission's motion for summary judgment against Sekhri. The Court found that Sekhri engaged in an insider trading scheme in which Sekhri's tips led to trades in the securities of MCI, BFP, CPS, CSW, and SNET, in advance of six merger and acquisition announcements involving these companies. Based on its findings, the Court permanently enjoined Sekhri from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3, and ordered him to disgorge $957,892.55 in insider trading profits of the individuals who traded based upon his tips. Sekhri was also ordered to pay prejudgment interest of $376,879.66, and to pay a civil penalty of $7,727,772.21.
The Division of Enforcement further alleges that, on March 14, 2000, Sekhri had entered a plea of guilty to a three-count indictment that charged him with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. He was convicted on two counts of federal securities fraud and one count of conspiracy to violate the federal securities laws. Sekhri was sentenced to 24 months in prison and later deported upon the completion of his sentence.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Sekhri an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.
For further information, see Litigation Release No. 17636 (July 30, 2002).