U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22775 / August 12, 2013
Securities and Exchange Commission v. Joseph M. Tocci, Civil Action No. 1:13-CV-11924 (District of Massachusetts, Complaint filed August 12, 2013)
SEC Charges Former Executive of Massachusetts-Based Company with Insider Trading
The Securities and Exchange Commission today charged Joseph M. Tocci, a former executive of Massachusetts-based American Superconductor Corporation, with insider trading ahead of an April 5, 2011 company announcement that caused the company's stock price to tumble 42% and reaped Tocci over $80,000 in profits. Tocci has agreed to settle the charges by, among other things, paying a total of over $170,000 in disgorgement of ill-gotten gains, prejudgment interest, and a civil penalty.
In a Complaint filed on August 12, 2013, in the U.S. District Court for the District of Massachusetts in Boston, the SEC alleges that Tocci, age 59, of Belmont, Massachusetts, used confidential information he obtained as the assistant treasurer of American Superconductor to purchase option contracts through which Tocci essentially bet that the company's stock price would soon decrease on the release of negative news. According to the SEC's Complaint, on or about March 31, 2011, Tocci learned through communications with American Superconductor's chief financial officer ("CFO") that the company's largest customer, Sinovel Wind Group Co. Ltd., had refused to accept shipments scheduled for delivery by the close of the company's fiscal year on March 31, 2011, and had failed to pay past due amounts for earlier shipments. These developments, the CFO said, would likely require a public announcement from American Superconductor within the next few days. The CFO instructed Tocci to keep this information confidential. On April 1, 2011, the Complaint alleges, Tocci improperly used this material, nonpublic information to purchase 100 put option contracts, which increased in value as American Superconductor's stock price decreased. On April 5, 2011, after the close of trading, the company announced that its financial results for its fourth quarter and fiscal year ended March 31, 2011 would be lower than expected due to a deteriorating relationship with Sinovel. The next day, American Superconductor's stock price plummeted 42%. By then selling his 100 put option contracts, Tocci earned illegal profits of approximately $82,439.
Tocci has agreed to settle this case by consenting to a judgment enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering him to pay disgorgement of $82,439 (representing his ill-gotten gains) plus prejudgment interest of $6,109 and a civil penalty of $82,439. Tocci also agreed to plead guilty in a parallel criminal case brought by the U.S. Attorney's Office for the District of Massachusetts in connection with the same conduct.
The SEC's investigation was conducted by Asita Obeyesekere, Michael Foster, and Kevin Kelcourse in the SEC's Boston Regional Office. The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the District of Massachusetts and the Federal Bureau of Investigation's Boston Field Office. The Commission also thanks the Options Regulatory Surveillance Authority and the Financial Industry Regulatory Authority for their assistance.