SEC Cracks Down on Seemingly Small-Time Insider Trading Activity

Although many have speculated that Securities and Exchange Commission (SEC) Chairman Jay Clayton’s leadership would equate to lax enforcement, it appears the commission is still keeping a watchful eye on insider trading. If the recent charges against a research scientist at Massachusetts Institute of Technology are any indication, the SEC is cracking down on relatively small-stakes insider trading activity.

The agency recently filed insider trading charges against Fei Yan of Massachusetts who allegedly used the Internet to try to circumvent the SEC, using the search term “how sec detect unusual trade” before making a trade that the agency flagged as suspicious through data analysis.

“The SEC’s complaint alleges that Yan loaded up on stocks and options in advance of two corporate acquisitions late last year based on confidential information obtained from his wife, an associate at a law firm that worked on the deals,” according to an SEC statement.

Illegal insider trading is defined by the SEC as “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.”

According to the July 12 SEC complaint, Yan made approximately $120,000 in illicit profits by selling his holdings in Mattress Firm Holding Corp. and Stillwater Mining Company following public announcements that they would be acquired by other companies.

Officials said Yan allegedly attempted to conceal his illegal activity by placing the illicit trades in a brokerage account bearing the name of his mother, who lives in China.  Among the internet searches he conducted was “insider trading in an international account.”

Following his arrest in Massachusetts, Yan was charged with securities fraud and wire fraud, according to news reports. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Yan earlier this month.

The SEC’s complaint charges Yan with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. The SEC’s complaint also names Yan’s mother, Rongxia Wu, as a relief defendant for the purposes of recovering illicit profits in the brokerage account in her name.

For future reference, you may want to avoid doing “insider trading” Google searches before you commit insider trading.

Related Articles

Companies Staying Mum on Potential for Vaccine Mandates

Public health experts have warned for months about the possibility of vaccine hesitancy thwarting efforts to control the Covid-19 pandemic. Polling co...

Will SEC Disclosure Request Keep Offerings on the Shelf?

The Great GameStop Affair of 2021 is quickly growing into more than just a piece of pop culture esoterica. Just a few weeks after frenetic trading of ...

Enforcement Renaissance Underway at SEC

Enforcement didn’t seem to be at the very top of the Securities and Exchange Commission’s to-do list in the last four years. At least, that’s wh...