SEC Charges Credit Ratings Analyst and Two Friends with Insider Trading
Litigation Release No. 24178 / June 29, 2018
Securities and Exchange Commission v. Pinto-Thomaz, et al., No. 1:18-cv-05757 (S.D.N.Y. filed June 26, 2018)
On June 26, 2018, the Securities and Exchange Commission charged a credit ratings agency employee with tipping two friends about The Sherwin-Williams Co.'s confidential plans to acquire The Valspar Corp., which he learned of through his work. The SEC also charged the two friends with trading on the illicit tips, which reaped them substantial profits.
According to the SEC's complaint, Sebastian Pinto-Thomaz, an analyst in the credit ratings agency's New York office, learned of the acquisition when Sherwin-Williams consulted the agency about the potential effect of the transaction on its credit rating. The SEC alleges that soon after, Pinto-Thomaz tipped his friends, who bought Valspar securities before the merger was announced. Valspar's shares rose 23 percent on the news and the friends, Abell Oujaddou, a co-owner and co-manager of an upscale New York hair salon, and Jeremy Millul, a New York jeweler, sold their holdings and respectively made approximately $192,000 and $107,000 in profits.
The SEC's complaint, filed in federal district court in Manhattan, charges Pinto-Thomaz, Oujaddou, and Millul with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks disgorgement of ill-gotten gains, prejudgment interest, penalties, and injunctive relief. In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Pinto-Thomaz, Oujaddou, and Millul.
The SEC's investigation, which is continuing, has been conducted by David C. Austin, Melanie A. MacLean, and Simona K. Suh of the SEC Enforcement Division's Market Abuse Unit and by Debbie Chan of the New York Regional Office, with assistance from John Rymas and Mathew Wong of the unit's Analysis and Detection Center. The case has been supervised by Joseph G. Sansone, Chief of the Market Abuse Unit. The SEC's litigation will be led by Mr. Austin, Ms. MacLean, and Ms. Suh. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.