U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19199 / April 21, 2005
SECURITIES AND EXCHANGE COMMISSION v. GUILLAUME POLLET, United States District Court for the Eastern District of New York, No. 05-CV-1937 (SLT/RLM) (E.D.N.Y.)
SEC CHARGES FORMER SG COWEN MANAGING DIRECTOR WITH INSIDER TRADING AND FRAUD IN CONNECTION WITH "PIPE" OFFERINGS
The Securities and Exchange Commission charged Guillaume Pollet, a former managing director of SG Cowen & Co., with insider trading and fraud by short selling the stock of companies prior to the companies closing on a private offering of stock, including offerings in which SG Cowen invested. The private offerings are often referred to as "PIPEs" for "private investment in public equity." At the time of the misconduct, Pollet was in charge of investing SG Cowen proprietary funds in PIPE transactions.
The Commission's Complaint, filed in the United States District Court for the Eastern District of New York, alleges that during 2001 Pollet traded in the shares of ten public companies that either engaged in, or were contemplating engaging in, PIPE financings after receiving confidential non-public information about the upcoming PIPE transaction. Specifically, Pollet routinely sold short the publicly traded securities of these PIPE issuers prior to the close of the PIPE transaction in order to lock in gains for SG Cowen's proprietary account. As a result of Pollet's illicit trading, SG Cowen locked in over $4 million in trading profits, in addition to other gains SG Cowen made on the transactions. In several instances, SG Cowen also acted as the PIPE issuer's investment banker.
The Commission's Complaint also alleges that, in several instances, Pollet's short selling was directly contrary to representations that SG Cowen made to PIPE issuers in connection with the PIPE transactions. For example, SG Cowen specifically represented to some of the PIPE issuers that SG Cowen would not short sell the securities of such issuer prior to the close of the PIPE transaction. SG Cowen also represented to each of the PIPE issuers that it was acquiring the PIPE securities with investment intent. SG Cowen made these representations at a time when Pollet had already started to short sell the securities of these PIPE issuers.
The Complaint alleges that through his fraudulent trading Pollet violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking injunctive relief, disgorgement of all ill-gotten gains plus pre-judgment interest, and civil penalties.
The staff acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation in this matter.
The Commission's investigation is continuing.