SEC Charges Former Investment Adviser with Insider Trading
Litigation Release No. 24863 / August 6, 2020
Securities and Exchange Commission v. Jack Brewer, No. 20-CV-6175 (S.D.N.Y. filed August 6, 2020)
The Securities and Exchange Commission today charged Jack Brewer with insider trading in the securities of COPsync, Inc. Brewer sold over $100,000 of COPsync stock in advance of a company announcement that caused the stock price to fall.
According to the SEC's complaint, Brewer, a former registered representative, was the owner and control person of both a registered investment adviser, Brewer Capital Management (BCM), and a related consulting firm, Brewer Group Inc. Brewer consulted for COPsync, where he obtained material, nonpublic information about COPsync's plans to do a stock offering. According to the complaint, Brewer participated in the offering, and the purchase agreement contained a clause obligating him not to sell any shares of the company prior to the announcement of the offering. Despite his obligations to the company to maintain confidentiality and not to use the confidential information for his own benefit, on January 4 and 5, 2017, he allegedly sold his shares before the company announced the stock offering. This allowed him to profit by approximately $35,000 more than he would have had he waited to sell his shares after COPsync issued its press release.
The complaint also alleges that, despite Brewer's regular access to materially nonpublic information by the terms of his consulting agreements, BCM failed to modify and enforce written policies and procedures to prevent the misuse of such information, and Brewer aided and abetted this violation. Further, the complaint alleges that during a two-year period, Brewer unlawfully acted as a securities broker without being associated with a broker-dealer or being registered as a broker with the SEC.
The complaint charges Brewer with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and the broker-dealer registration provision of Section 15(a) of the Exchange Act, and with aiding and abetting BCM's violations of Section 204A of the Investment Advisers Act and Rule 204A-1 thereunder. The SEC seeks a permanent injunction, disgorgement with prejudgment interest, a civil penalty, and a penny stock bar.
The SEC's investigation was conducted by Todd Brody, Bennett Ellenbogen, Lindsay S. Moilanen, George O'Kane, and Sheldon L. Pollock of the New York Regional Office, and was supervised by Lara S. Mehraban. The SEC's litigation against Brewer is being handled by Mr. Brody, Mr. Ellenbogen, Ms. Moilanen, and Preethi Krishnamurthy.