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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20380A / December 5, 2007

Securities and Exchange Commission v. David W. Knall, Case No. 1:07-CV-1562-RLY-WTL (S.D. Ind.)

SEC Sues Indianapolis Broker and Investment Adviser for Personal Trading in Advance of a Tender Offer

The Securities and Exchange Commission announced that on December 3, it filed a complaint in the U.S. District Court for the Southern District of Indiana against David W. Knall, a registered representative and investment adviser, for trading in advance of Dick's Sporting Goods Inc.'s June 21, 2004, announcement that it intended to acquire Galyan's Trading Company, Inc. via a tender offer. The complaint alleges:

  • Knall, a resident of Indianapolis, acquired material, nonpublic information relating to the tender offer on June 12, 2004.
     
  • Four days later, on June 16, he purchased 10,000 shares of Galyan's stock to cover a previously established short position in his brokerage account.
     
  • Prior to trading, Knall did not try to determine whether there had been any public announcement about an acquisition or any material increase in Galyan's stock price, even though he had reason to know that the information he acquired came indirectly from a Dick's representative.
     
  • Knall avoided $55,281 in losses by covering his short position prior to the June 21 public announcement of the tender offer.

The day after the public announcement, Galyan's stock closed at $16.68, a 50.3% increase from the previous day's closing price of $11.10.

Without admitting or denying the allegations in the complaint, Knall consented to the entry of a Final Judgment, subject to the court's approval, in which he is permanently enjoined from future violations of the insider trading provisions of the federal securities laws that relate to tender offers [Section 14(e) and Rule 14e-3 of the Securities Exchange Act of 1934]. Knall also agreed to pay disgorgement of $55,281, plus prejudgment interest in the amount of $13,303.13, and a one-time civil penalty of $55,281. Knall has also consented to the entry of an order in a public administrative proceeding to be instituted by the Commission suspending him from association with any broker, dealer or investment adviser for a period of twelve months pursuant to Section 15(b)(6) of the Exchange Act and Section 203(f) of the Investment Advisers Act.

 

http://www.sec.gov/litigation/litreleases/2007/lr20380a.htm

Modified: 12/05/2007