SEC Charges Research Analyst With Insider Trading on Mother's Brokerage Account

The U.S. Securities and Exchange Commission (SEC) recently announced insider trading charges against a research analyst who allegedly reaped over $1.5 million in February via trades he made in his mother’s brokerage account. All this was based on nonpublic information he learned while at work.

In its report, the agency alleged that John Afriyie found out about an impending acquisition of home security company ADT Corp. (NYSE: ADT) when prospective acquirer Apollo Global Management LLC (NYSE: APO) approached the Manhattan-based investment firm where he was employed and discussed potential debt financing for a public-to-private deal.

Subsequently, Afriyie accessed several highly confidential, deal-related documents on the firm’s computer network and purchased thousands of high-risk, out-of-the-money ADT call options. This was done on his mother’s brokerage account in anticipation that ADT’s stock price would rise when the transaction was publicly announced. The ADT deal was announced on February 16, and afterward Afriyie sold all the ADT options in his mother’s account to obtain his illicit profits.

Jina L. Choi, director of the SEC’s San Francisco Regional Office, commented:

Insider traders should have learned by now that trying to hide their illegal activity in a relative’s account ultimately won’t work. On behalf of the millions of traders in our markets who play by the rules, we will continue to detect and expose those who don’t.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Afriyie.