The former chairman of a regional investment bank and his longtime stockbroker friend were charged with trading on inside information concerning at least 5 pending corporate acquisitions.  The SEC allege Richard Hansen, an RR and the former chairman of a regional investment bank, traded on inside information concerning at least five pending corporate acquisitions, and he passed along information about one of the acquisitions to Stuart Kobrovsky who, in turn, traded on that information. All told, the pair are alleged to have made illegal trading profits of about $215,000. 

Kobrovsky agreed to pay over $200,000 in disgorgement and prejudgment interest - no fines were imposed - to settle the SEC charges.  Hansen was released on a $50,000 bond - in a parallel criminal case, he was charged with securities fraud by the U.S. Attorney's Office in New York.

    According to the SEC Complaint.  From at least the summer of 2006 through the spring of 2007, Hansen learned of each of the pending acquisitions, and the identity of the target companies, from his business associate, Donna Murdoch.  Ms. Murdoch apparently had learned the information from James Gansman, then a partner with Ernst and Young, in the Transaction Advisory Services Department.  By tipping Murdoch with material, non-public information about pending acquisitions, Gansman breached of a duty of confidentiality he owed to E&Y and its clients.

Hansen is alleged to have traded on that information, and in one instance to have tipped his longtime friend, Stuart Kobrovsky, who also traded.  Both allegedly knew or recklessly disregarded that the tips on which each traded stemmed from a breach of duty to the information’s source.  Hansen traded in his daughters’ accounts in the securities of at least 2 companies that were acquisition targets of E&Y’s clients - ATI Technologies and Freescale Semiconductor, and trading through Murdoch’s account in ATI, Freescale and another target, Bausch and Lomb, realizing illegal profits totaling at least $52,000.  Friend Kobrovsky realized $163,000 in illegal profits. 

For their part, Murdoch and Gansman were both defendants in a recently settled civil case with the SEC, and both were charged in a parallel criminal case. In the criminal case, Murdoch entered guilty pleas to a total of 17 felony counts and is awaiting sentencing.  Gansman was convicted by a jury of six felony counts and acquitted of four.  He's currently incarcerated pending his appeal.   [SEC Litigation Rel. 21667, 9/27]