We know the SEC is understaffed. We know they've lost droves of top leadership. We know morale could improve. But if you're an investment banker looking to test the SEC's mettle with some insider trading, you're going to have to try a little bit harder than the Nomura VP who was charged Monday with three securities violations and one giant insult to the SEC's intelligence.
The defendant is Avaneesh Krishnamoorthy, a vice president in risk management at Nomura, according to a LinkedIn profile matching the description in the SEC complaint, which doesn't name the bank. His alleged misdeeds read like an Idiot's Guide to Insider Trading. In his position as risk manager, Krishnamoorthy was privy, allegedly, to confidential information on pending deals. These included the December 2016 acquisition of the publicly traded NeuStar LLC by private equity firm Golden Gate Capital. Here's a timeline, drawn entirely from the SEC's documents:
- Nov. 23, 2016: Nomura circulates a document introducing Golden Gate's plan to buy NeuStar.
- Nov. 25: A brokerage account – opened in 2015 in Krishnamoorthy's wife's name – adds 800 shares of NeuStar at around $25 apiece, as well as nine call options with a strike price of $25, expiring Dec 16.
- Nov. 28: Nomura circulates a memo that confirms Golden Gate will buy NeuStar at $30.50 a share, representing a 22 percent premium.
- The next two weeks: Wife's account adds a bunch more shares and call options, as does an IRA Krishnamoorthy opened – in his own name – the previous year.
- Dec. 14: NeuStar announces acquisition. Stock shoots up 21 percent. Krishnamoorthy subsequently sells a bunch of call options and stock, earning around $48,000.
- April 4: Finra knocks on Nomura's door.
It really doesn't get much simpler than that. There's nothing elaborate or subtle here. No plumber friends getting hot tips. No paper bags stuffed with cash. No posing as one's mother. Not even any juicy quotes thrown into the criminal complaint to get our dander up. Just a completely by-the-books insider scheme: (1) Learn some insider information; (2) buy some stock and out-of-the-money call options; (3) profits!
Come on, now. We can do better than this.