Litigation Release No. 22372 / May 22, 2012
SEC v. Reema D. Shah and Robert W. Kwok, Civil Action No. 12-CV-4030 (S.D.N.Y.) (ALC)
SEC Charges Former Yahoo Executive and Ameriprise Mutual Fund Manager With Insider Trading
The Securities and Exchange Commission announced insider trading charges against Robert W. Kwok, a former Senior Director of Business Management at Yahoo! Inc., and Reema D. Shah, a former mutual fund and hedge fund portfolio manager at RiverSource Investments, LLC, an investment adviser subsidiary of Ameriprise Financial, Inc. The SEC alleges that Kwok and Shah illegally tipped and traded on material, nonpublic information concerning Yahoo and Moldflow Corporation.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Kwok and Shah, both Bay Area residents, first met in 2008, and thereafter spoke frequently in person and over the telephone. According to the complaint, Kwok provided Shah with information about Yahoo, and in return Shah provided Kwok with information she learned during the course of her work, which Kwok used in making personal investment decisions.
The SEC alleges that in July 2009, Kwok, in breach of his duty to Yahoo, tipped Shah material, nonpublic information that an internet search engine partnership agreement between Yahoo and Microsoft Corporation, which had long been the subject of market rumors, would announced soon. The SEC alleges that, based on Kwok’s tip, Shah caused certain of the funds she helped manage, including the Seligman Communications and Information Fund, to purchase approximately 700,000 shares of Yahoo. The shares were later sold resulting in profits of approximately $389,000.
The SEC further alleges that, in April 2008, Shah tipped Kwok material, nonpublic information concerning an upcoming acquisition of Moldflow by Autodesk, Inc. As alleged in the complaint, this inside information had been misappropriated by an Autodesk insider and tipped to Shah. The SEC alleges that, based on this tip, Kwok purchased 1,500 shares of Moldflow in a personal account, which he subsequently sold after announcement of the acquisition, realizing profits of approximately $4,750.
As a result of the conduct alleged in the complaint, the SEC alleges that Kwok and Shah violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Both Kwok and Shah have agreed to consent to judgments, which are subject to Court approval. The judgments permanently enjoin both defendants from future violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5, bar Kwok from serving as an officer or director of public company, and provide that the Court will later determine issues relating to disgorgement and civil penalties. In a related administrative proceeding, Shah also consented to the entry of an SEC Order barring her from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent.
Additionally, in parallel criminal actions announced yesterday by the U.S. Attorney’s Office for the Southern District of New York, Kwok pled guilty to conspiracy to commit securities fraud and Shah pled guilty to securities fraud and conspiracy to commit securities fraud. United States v. Reema Shah, 12-CR-404 (S.D.N.Y.) and United States v. Robert Kwok, 12-CR-405 (S.D.N.Y.). Both defendants are awaiting sentencing.
The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in this matter.
The SEC’s investigation is continuing.