U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20434 / January 22, 2008
Securities and Exchange Commission v. Saiyed Atiq Raza, Case No. CV 08-0375 (N.D. Cal. Filed January 22, 2008)
Bay Area Former Board Member to Pay $3 Million to Resolve SEC Insider Trading Charges
The Securities and Exchange Commission today filed insider trading charges against a former director of San Francisco-based company OrthoClear Holdings, Inc., who unlawfully netted nearly $1.5 million by trading on confidential company information. Without admitting or denying the allegations, Saiyed Atiq Raza, 58, of Palo Alto, California, agreed to a settlement under which he will pay nearly $3 million in disgorgement and penalties, be barred from serving as an officer or director of a public company for five years and be permanently enjoined from future violations of the federal securities laws.
According to the Commission, Saiyed Atiq Raza was informed in confidence by OrthoClear's CEO that the company had reached a settlement of long-running litigation that would significantly benefit its primary competitor in the transparent teeth-aligner market, Santa Clara-based Align Technology. Rather than maintain the confidentiality of the information, Raza used it for his own benefit by buying Align securities before the settlement agreement became public.
The Commission's complaint, filed in the United States District Court for the Northern District of California, alleges that OrthoClear (a private company) and Align (a public company) were engaged in contentious litigation. In September 2006, OrthoClear's CEO contacted Raza and other board members to seek their approval of a highly-confidential settlement under which OrthoClear would cease competing against Align in the transparent teeth-aligner market. According to the complaint, two days later Raza began making large purchases of Align call options (securities that would increase in value if Align's stock price rose) and common stock. Indeed, Raza's option purchases represented nearly half of the Align option trading volume for September 22. When the OrthoClear settlement was publicly announced several days later, the price of Align stock shot up 48% and Raza made an immediate unlawful profit of $1,450,900.
Raza is charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Without admitting or denying the Commission's allegations, Raza has agreed to pay a total of $2,977,842, including $1,450,900 in disgorgement of his trading profits, $76,042 in prejudgment interest and a civil penalty of $1,450,900. Raza has also agreed to a five-year officer and director bar and permanent injunction against future violations of the antifraud provisions of the federal securities laws.
The Commission acknowledges the assistance of the Chicago Board of Options Exchange (CBOE) in this matter.