SEC Charges Former Medical Device Company Employee for Illegally Tipping Brother with Quarterly Earnings Data
The Securities and Exchange Commission today charged a former employee at a California-based medical device manufacturer with illegally tipping confidential financial data to her brother, who illegally traded in the company's stock and enabled his hedge fund clients to do the same.
The SEC alleges that ThanhHa Bao, who worked in the finance department at Abaxis Inc., regularly provided material nonpublic information to Tai Nguyen, whose insider trading in advance of the company's quarterly earnings announcements generated $144,910 in illicit profits. Nguyen, who was charged by the SEC last year, also passed confidential information to clients of his equity research firm Insight Research, including hedge fund managers.
To settle the SEC's charges, Bao has agreed to pay $144,910 and be barred from serving as an officer or director of a public company for five years.
"When corporate insiders leak confidential information to a select few, the integrity of our markets is undermined," said Sanjay Wadhwa, Senior Associate Director of the SEC's New York Regional Office. "Abaxis entrusted ThanhHa Bao with market-moving information, and she violated that trust to financially benefit her family."
The SEC's charges stem from its ongoing investigations into expert networks that have uncovered widespread insider trading at several hedge funds and other investment advisory firms. The investigations have so far resulted in enforcement actions against 40 entities or individuals who have reaped more than $430 million in alleged insider trading gains.
According to the SEC's amended complaint filed in federal court in Manhattan, Bao regularly passed Abaxis quarterly earnings data to Nguyen from 2006 to 2009. Besides illegally trading in his own account, Nguyen passed the inside information to hedge fund managers Barai Capital Management and Sonar Capital Management, which were paying Insight Research tens of thousands of dollars per month as clients. These hedge fund managers traded Abaxis securities based on the inside information provided by Nguyen for more than $7.2 million in illicit gains for the hedge funds. Those who caused the trading at these hedge funds were later charged by the SEC with insider trading.
In a parallel criminal proceeding, Nguyen pleaded guilty and has been sentenced to a year and a day in prison. He also agreed to a criminal forfeiture of $400,000.
The SEC's amended complaint charges Bao with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The settlement, which is subject to court approval, requires Bao to pay $144,910 in penalties and be barred from serving as an officer or director of a public company for a period of five years. She also would be permanently enjoined from future violations of the federal securities laws.
The SEC's investigation, which is continuing, has been conducted by Daniel Marcus and Joseph Sansone - members of the SEC's Market Abuse Unit in New York - and Matthew Watkins, Neil Hendelman, Diego Brucculeri, and James D'Avino in the New York Regional Office. The investigation has been supervised by Sanjay Wadhwa. The SEC acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.