Bank Board Member Showed A Lot Of Restraint By (Allegedly!) Only Making 1 Of His 5 Illegal Trades During Actual Board Meeting

Say what you will about James Cope- and the SEC has a lot to say- the man is DISCIPLINED.
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Put it up for sale! By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons

via Wikimedia Commons

When you're the type of person who likes to trade on material non-public information, you generally want to do it as quickly as possible. But in many instances, social mores dictate that you must wait until the time is right. For instance, if you were at a cocktail party and the person you were speaking to happened to mention a big upcoming merger, it would be rude for you to hand him or her your drink and say "Hold this for one sec" while you got on phone with your broker to buy up a ton of shares right in front of the guy or gal who gave you the info, every so often giving them the shhh sign and maybe even putting your hand over the receiver and hissing "Can you keep it down, this is important." Clearly, that would be rude.

Take James Cope. Once he got his hands on a hot tip-- from the bank board of directors on which he sat-- he probably realized that proceeding to make five trades based on the inside info while the meeting went on would be a bit unseemly. But just one? Entirely within the bounds of appropriate behavior. He's not an animal.

The [SEC] formally charged Cope, a lawyer and former member of Pinnacle Financial Partners's board, with insider trading on Friday after he allegedly purchased shares of Avenue Financial Holdings prior to the two firms announcing a merger in January. "According to the SEC's complaint, Cope learned confidential details about the planned merger during a board executive committee meeting on Jan. 5, 2016, and proceeded to place his first order to purchase Avenue Financial stock while that executive committee meeting was still in progress," the SEC said in a release, adding Cope allegedly made four more order within an hour after the meeting ended.

SEC accuses former Pinnacle Financial board member of insider trading...during board meeting [CNBC]

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Members Of Insider Trading "Club" Were Good At Obtaining Material Non-Public Information, Not So Good At Playing It Cool On Conversations Recorded By The Feds

Later this week, Anthony Chiasson, a Level Global co-founder, and Todd Newman, a former Diamondback portfolio manager, will go to trial in Federal Court for allegedly making $67 million in ill-gotten gains, based on inside information they obtained about Nvidia Corp and Dell Inc. According to U.S. Attorney Preet Bharara, Chiasson and Newman, who've both pleaded not guilty, were able to rack up all their profits by teaming up with a bunch of friends and forming an insider trading club, which is a lot like a book club or fight club in that they took roll, traded canapé duties, and drank Pinot Grigio, but different in that instead of discussing The Art Of Fielding or punching each other in the face, they spent every Monday night from 7 to 9 sharing material non-public information with each other. “This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.” In the beginning, when the club was first formed, there was a spirit of camaraderie, as the club members happily traded tips for everyone's mutual benefit. Unfortunately, things started to break down when some people agreed to cooperate with the government by recording their friends admitting wrongdoing, in exchange for leniency. Former Diamondback analyst Jesse Tortora, for instance, gave fellow club member Danny Kuo a call at the direction of the FBI on December 1, 2010, a conversation that Chiasson and Newman's lawyers are trying to use as evidence that Tortora, who will be testifying against them, lacks credibility, based on the fact that when asked by Kuo if his phone was being tapped, Tortora didn't say "Yup! Helping the Feds build a case against you, actually." “What’s happening, man?” Tortora asked during the call, according to a transcript prosecutors submitted to the court. “Dude, is your phone tapped?” Kuo replied. “Wait, is the phone tapped?” Tortora asked, adding, “Why do you ask that?” Despite losing major points for repeating the question-- you never repeat the question!-- and the extremely unconvincing "Oh, why do you ask" attempt to act natural and not like he was working for the government, Tortora ultimately recovered. After Kuo and Tortora discussed defense strategy to explain their trades were made after legitimate research, Kuo concluded the call with a final warning to Tortora about making future calls from a personal telephone, according to the transcript. “I would seriously invest in some quarters, and start calling from 7-Elevens,” Kuo said. Hedge Fund Founder Faces Jury as FBI Raids Yield Trial [Bloomberg]

Maybe Accused Insider Trader Timothy McGee Thought Intel Obtained In AA Meetings Got A Free Pass Under Securities Laws?

Pop quiz: you're an insider trader looking to score some fresh intel. You've exhausted all of your sources and what's more, you're sick of just hitting them up for tips-- you want to make obtaining material non-public information fun again. You figure the best way to go about that is to identify a target with obvious vulnerabilities that can be exploited for profit (always a good time). Do you a) go with the Danielle Chiesi move (i.e. requesting info post or, better yet, mid-coitus) b) get ordained as a Catholic priest and press penitents for potential market moving news during confession or c) go for broke: start attending AA meetings, become someone's sponsor and then, when he/she's confiding in you that the stress of his/her job at a certain company has been driving him/her to down a bottle of vodka every night, move in for the kill? If you're Timothy J. McGee, the answer is simple. The Securities and Exchange Commission today charged two financial advisors and three others in their circle of family and friends with insider trading for more than $1.8 million in illicit profits based on confidential information about a Philadelphia-based insurance holding company’s merger negotiations with a Japanese firm. The SEC alleges that Timothy J. McGee and Michael W. Zirinsky, who are registered representatives at Ameriprise Financial Services, illegally traded in the stock of Philadelphia Consolidated Holding Corp. (PHLY) based on nonpublic information about the company’s impending merger with Tokio Marine Holdings. McGee obtained the inside information from a PHLY senior executive who was confiding in him through their relationship at Alcoholics Anonymous (AA) about pressures he was confronting at work. McGee then purchased PHLY stock in advance of the merger announcement on July 23, 2008, and made a $292,128 profit when the stock price jumped 64 percent that day. “McGee stole information shared with him in the utmost confidence, and as securities industry professionals he and Zirinsky clearly knew better,” said Elaine C. Greenberg, Associate Director of the SEC’s Philadelphia Regional Office. “As this case demonstrates, we will follow each link in a tipping chain all the way to Hong Kong if necessary.” From the complaint: In early July 2008, immediately after an AA meeting, the Insider confined to McGee that he had been drinking as a result of the mounting pressure, and revealed to McGee that the source of the pressure was ongoing confidential negotiations to sell PHLY. The Insider told McGee that the stress generated from his participation in the negotiations was having a negative impact on his personal life. In response, McGee expressed interest in the details of the PHLY sale and questioned the Insider about the details fo the impending deal. SEC Charges Five With Insider Trading on Confidential Merger Negotiations Between Philadelphia Company and Japanese Firm [SEC]