U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22612 / February 6, 2013
Securities and Exchange Commission v. James Balchan, Civil Action No. 4:13-cv-00298 (U.S. District Court for the Southern District of Texas)
The Securities and Exchange Commission today charged a Houston man with insider trading ahead of the acquisition of Santa Clara-based National Semiconductor Corporation based on confidential details that he gleaned from his wife, a partner at a large law firm that was consulted on the deal.
The SEC alleges that James Balchan immediately bought shares of National Semiconductor stock after his wife informed him that a social event for the company's general counsel had been cancelled because he was busy working on an imminent merger. Balchan and his wife were among the invitees to the event. Balchan made nearly $30,000 in illicit profits when he sold his shares after Texas Instruments publicly announced its acquisition of National Semiconductor and the stock price jumped more than 75 percent.
Balchan agreed to pay nearly $60,000 to settle the SEC's charges.
According to the SEC's complaint filed in U.S. District Court for the Southern District of Texas, another partner at the firm where Balchan's wife worked began organizing informal client "wine and dine" events for the first weekend of April 2011 in honor of National Semiconductor's general counsel. The partner was close to Balchan's wife and socially acquainted with Balchan. The partner invited both of them to the weekend events and told them that National Semiconductor's general counsel would be in attendance.
According to the SEC's complaint, the partner called National Semiconductor's general counsel a few days before the weekend and was informed that he was working on the company's impending acquisition. The general counsel sought the law firm's advice in dealing with certain regulatory issues arising from the deal. He also informed the partner that, in light of the acquisition, he would be unable to attend the event that coming weekend. When the law partner advised Balchan's wife that National Semiconductor's general counsel cancelled the client weekend because of the imminent acquisition, she shared the information with Balchan in confidence later that night in the context of discussing their weekend plans.
The SEC alleges that the very next morning, Balchan misappropriated the confidential information he learned about the acquisition and purchased 2,000 National Semiconductor shares. A few days later, Balchan purchased 1,000 shares. Texas Instruments issued a press release on April 4 announcing its acquisition of National Semiconductor. Each of Balchan's National Semiconductor trades was based on inside information in violation of duties of trust and confidence that he owed to his wife. Balchan was aware that his wife owed a duty of trust or confidence to her law firm and its clients.
The SEC's complaint charges Balchan with violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Balchan has settled the SEC's charges without admitting or denying the allegations. He has agreed to the entry of a judgment enjoining him from future violations of relevant provisions of the Exchange Act, and to pay disgorgement and prejudgment interest of $30,615.18, and an additional penalty equal to his profits of $29,052.39.
The SEC's investigation was conducted by Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.