U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21996 / June 13, 2011
Securities and Exchange Commission v. Phillip E. (Rick) Powell, (Case No. 6:11-cv-161, W.D. Tex. [Waco Division], filed June 10, 2011)
SEC CHARGES FORMER CHAIRMAN OF THE BOARD OF FIRST CASH FINANCIAL SERVICES WITH INSIDER TRADING
The Securities and Exchange Commission today charged Phillip E. (Rick) Powell, former chairman of the board of First Cash Financial Services, Inc. (“First Cash”), with illegal insider trading. The SEC’s Complaint, filed in United States District Court for the Western District of Texas (Waco Division), alleges that in early March 2008 Powell, while he was serving as the chairman of the board of First Cash, learned material, non-public information about the commencement of a company share buyback.
According to the Complaint, on November 6, 2007, the company had announced that it had authorized a buyback of up to 1 million First Cash shares. That announcement did not disclose when the authority would be exercised or even whether management would actually exercise the authority. The SEC alleges that Powell, through his position as chairman of First Cash’s board of directors, later learned, among other things, that First Cash had decided to actually exercise its repurchase authority and was set to begin the repurchase.
According to the Complaint, Powell, armed with this material, non-public information, called his broker on March 11, the same day that First Cash entered into an agreement with JP Morgan Securities to facilitate the repurchase and the day before First Cash began repurchasing its shares. He instructed the broker to buy 100,000 First Cash shares. According to the SEC’s Complaint, Powell insisted that the purchase needed to be made that day.
As alleged in the Complaint, Powell’s pre-buyback purchases caused First Cash to overpay $36,000 for its own securities between March 12 and March 14, 2008. In addition, the SEC alleges that, as a result of the share price increase following disclosure that the buyback had commenced, Powell profited in the amount of $124,000 from his illegal purchase.
Powell is alleged to have repeatedly tried to hide his trading from First Cash and its shareholders. For example, the Complaint alleges that he misled another board member when he was warned against purchasing in advance of the buyback, and later he misled First Cash’s chief executive officer when he asked about the trade. In addition, after his broker warned him that Commission rules required him to file a Form 4 disclosing his trade, he refused to do so and delayed filing his Form 4 until April 30, 2009, over thirteen months after it was required by Commission rules and only after he knew the Commission was investigating his trades.
The SEC’s complaint alleges that, as a result of his conduct, Powell violated Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 16a-3 thereunder. The Commission seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, a monetary penalty, and an order barring Powell from serving as an officer or director of a public company.
The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Northern District of Texas and the Federal Bureau of Investigation.