Former Director At Major Accounting Firm Settles Insider Trading Charges
Aug. 20, 2018
File No. 3-18652
August 20, 2018 - The Securities and Exchange Commission today announced that a former director of a major accounting and auditing firm has agreed to settle charges that he engaged in insider trading in the securities of Kraft Foods Group, Inc. before the public announcement of a merger between Kraft and the H.J. Heinz Company on March 25, 2015.
According to the SEC's order, in mid-March 2015, Joseph Jennings, a Certified Public Accountant, learned that his firm's clients Heinz and Kraft planned to enter into a merger agreement. Two days before the merger announcement, Jennings purchased 100 Kraft call options in a close relative's online brokerage account. Those options increased in value by approximately $150,500 following the Kraft-Heinz merger announcement. Jennings did not sell or exercise the options, and, in June 2015, Jennings and his close relative instructed the brokerage firm where the account was held to allow the options to expire. Later, in July 2015, Jennings's relative's name appeared on a list that was circulated within the accounting firm in connection with an inquiry by the Financial Industry Regulatory Authority. Although Jennings acknowledged his relationship with the relative, he did not inform his employer either that he controlled the relative's brokerage account or that he had purchased Kraft securities in that account before the Kraft-Heinz merger announcement.
The SEC's order finds that Jennings violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC's findings, Jennings agreed to a cease-and-desist order, to pay a penalty of $150,500, and to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC's order permits Jennings to apply for reinstatement after two years.
The SEC's investigation was conducted by Barry P. O'Connell, David Oliwenstein, and Simona Suh of the SEC's Market Abuse Unit and by Sandeep Satwalekar and Matthew Lambert of the SEC's New York office, with the assistance from Hugh Beck and John Rymas in the Market Abuse Unit's Analysis and Detection Center. The case was supervised by the Market Abuse Unit's Chief, Joseph G. Sansone. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.