U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21859 / February 16, 2011
Securities and Exchange Commission v. Zhenyu Ni, Civil Action No. CV-11-0708 DMR (N.D.Cal. February 16, 2011)
SEC Files Insider Trading Charges Against Brother of Cosmetics Company Executive
The Securities and Exchange Commission today charged a San Francisco man with unlawfully profiting from advance knowledge of the pending acquisition of Bare Escentuals, Inc., a Bay Area cosmetics company, based on information he had garnered from his sister, a former executive with the company. According to the Commission, Zhenyu Ni, 36, overheard his sister discuss a then-secret acquisition of Bare while visiting her office, and misappropriated this information for his own benefit by purchasing Bare stock and call options. Without admitting or denying the allegations, Ni has agreed to pay disgorgement and penalties of over $300,000.
According to the Commission’s civil complaint, filed in the United States District Court for the Northern District of California, Ni visited the office of his sister, Bare’s then Director of Tax, in December 2009 while she was in the midst of preparing due diligence for the possible acquisition of Bare Escentuals by Shiseido Co., Ltd, a Japanese company. While there, Ni is alleged to have overheard his sister taking phone calls during which she used words such as “due diligence file,” “potential buyer” and “merger structure.” Ni then began purchasing Bare stock and call options, ultimately spending almost $165,000 over the next month acquiring securities in his and his father’s brokerage accounts. When Bare announced the tender offer after market close on January 14, 2010, the company’s stock price jumped more than 40%, and Ni allegedly netted illegal profits of $157,066.
The Commission’s complaint, filed in federal district court for the Northern District of California, charges Ni with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Ni has agreed to settle the SEC’s charges without admitting or denying the allegations. Ni has consented to the entry of a final judgment permanently enjoining him from violating Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder, and requiring him to pay $157,615 in disgorgement and prejudgment interest and a $157,066 civil penalty. The SEC’s action does not name Ni’s sister as a party.