[ by Melanie Gretchen ] The SEC charged 2 people - a former Yahoo! executive and a former fund manager with an affiliate of Ameriprise Financial - with trading on material non-public information regarding a joint venture between Yahoo! and Microsoft Corporation. Tipper and Tippee. In July 2009, Robert Kwok, 36, a resident of Danville, CA, was a Senior Director of Business Management at Yahoo! Inc.  He is the tipper.  Reema Shah, 39, a resident of Menlo Park, CA, was a portfolio manager at RiverSource Investments, LLC, an RIA and a wholly-owned subsidiary of Ameriprise Financial, Inc.  She is the tippee who traded on the information.  Shah previously ran portfolios for J. & W. Seligman & Co., Inc., which Ameriprise acquired in November 2008.  At RiverSource, Shah was a portfolio manager for multiple mutual funds and hedge funds, including the Seligman Communications and Information Fund (the "C&I Fund"). Shah and Kwok apparently first met in January 2008, when Shah was attending a real estate conference in California at the same facility where Yahoo was holding a meeting.  They met in a hallway and began discussing their respective businesses, and thereafter they spoke frequently by phone or in person.  Kwok provided Shah with information about Yahoo, including whether Yahoo's quarterly financial performance was expected to be in line with market estimates.  In turn, Shah provided Kwok with information she learned in the course of her work, which he used to help make his personal investment decisions. Thereafter, Shah reportedly followed Yahoo closely as a portfolio manager at Ameriprise subsidiary RiverSource Investments LLC and previously at J. & W. Seligman & Co. SEC Findings and Allegations. In July 2009, Robert Kwok allegedly passed along material nonpublic information to Reema Shah that a deal between Yahoo and Microsoft would soon be announced.  Using Kwok's illegal tip, Shah bought more than 700,000 shares of Yahoo! stock for her mutual funds.  Two weeks later, she sold the shares for illicit profits of $389,000. One year earlier, the roles were reversed.  Shah tipped Kwok with material nonpublic information about an impending acquisition announcement between 2 other companies.  Using that information, Kwok traded in a personal account and earned profits of about $5,000.

"Kwok and Shah played a game of you scratch my back and I'll scratch yours."  -- Scott Friestad, Associate Director in SEC Enforcement.

In a parallel criminal case announced today by the U.S. Attorney's Office for the Southern District of New York, Kwok pled guilty to conspiracy to commit securities fraud, and Shah pled guilty to both a primary and conspiracy charge.  Both await sentencing. SEC Sanctions. The SEC charges Kwok and Shah with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  Both agreed to plead guilty to the SEC charges. Under the settlements, Shah is permanently barred from the securities industry and Kwok is permanently barred from serving as an officer or director of a public company.  Financial penalties and disgorgement will be determined by the court at a later date. The SEC's investigation continues. SEC Staff Credits. Investigation by Brian Quinn, Brian Vann in SEC Enforcement. For further details, go to the [SEC, 5/21/12] and the [SEC complaint].