SEC Charges Investment Banker and Plumber With Insider Trading

The U.S. Securities and Exchange Commission (SEC) recently announced insider trading charges against an investment banker and his close friend, a plumber who allegedly helped remodel his bathroom and put cash in his gym bag in return for illicit tips about upcoming mergers and acquisitions.

The agency alleged that Steven McClatchey had regular access to highly confidential nonpublic information about impending transactions being pursued for investment bank clients.

Separately, the Analysis and Detection Center within the SEC Enforcement Division’s Market Abuse Unit detected an illicit pattern of trading by Gary Pusey, who McClatchey allegedly tipped with nonpublic information on 10 different occasions ahead of public merger announcements.

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Joseph Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, commented:

We will continue enhancing our market surveillance techniques to detect patterns of insider trading and expose schemes, even when alleged perpetrators like McClatchey and Pusey attempt to avoid detection by providing in-person tips and cash payments.

According to the SEC’s complaint filed in federal court in Manhattan:

• The scheme began in early 2014 after McClatchey and Pusey became close friends upon meeting at a marina where they kept their fishing boats.
• One of McClatchey’s job responsibilities was to collect timely information about potential mergers and acquisitions involving clients of the investment bank where he worked in New York City.  McClatchey misused his ready access to confidential information and regularly tipped Pusey.
• Pusey used the misappropriated nonpublic information as he purchased securities in 10 companies before their acquisitions were announced publicly, enabling him to generate $76,000 in illicit trading profits.
• In return for the tips, Pusey provided McClatchey with free services during his bathroom remodel and paid him thousands of dollars in cash that he typically placed in McClatchey’s gym bag while at the marina or handed to him directly in his garage.

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

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