U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18564 / February 4, 2004
SEC v. Kenneth S. Martin, (U.S. District Court for the Southern District of New York, Civil Action No. 04 Civ. 00938 (MBM))
The Securities and Exchange Commission today filed a civil injunctive action against a former employee-benefits consultant, Kenneth Martin, of New York City, with using inside information to purchase securities in FleetBoston Corp. shortly before the public announcement in October 2003 that FleetBoston would merge with Bank of America. The Commission also alleged that Martin had committed an earlier act of insider trading in March 1999 involving BankBoston's acquisition by Fleet Financial Group. Simultaneously with the filing of its action, the Commission accepted Martin's offer of settlement, in which he agreed, without admitting or denying the allegations, to a court order enjoining him from future violations of anti-fraud provisions in the securities laws and requiring him to pay approximately $95,000 in wrongful trading profits and penalties.
According to the complaint filed in the United States District Court for the Southern District of New York, Martin, in the course of his employment at a New York consulting firm, obtained material non-public information concerning two issuers and illegally bought stock while in possession of the information. First, in March 1999, Martin bought 1,000 shares of BankBoston prior to an announcement on March 14, 1999, that it would be acquired by Fleet Financial. His imputed profits from the purchase were about $3,000. Second, in October 2003, Martin learned confidential information that Bank of America and FleetBoston Corp. were having discussions concerning a major transaction, and bought 6,000 shares of FleetBoston stock, for a total of about $200,000. Following the announcement of the merger, on October 27, 2003, Martin's investment rose in value by about $44,000.
In order to settle the charges, Martin agreed to the entry of an order permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, Martin agreed to pay disgorgement of $47,266 in illegal trading profits, plus $1,227 in prejudgment interest; and to pay a civil money penalty equal to his trading profits in the amount of $47,266.
In accepting Martin's settlement, the Commission took into account Martin's significant cooperation in the staff's investigation, including the fact that he voluntarily contacted the staff to self-report his trades and worked with the staff to resolve this matter promptly.