[ by Howard Haykin ] The SEC on Wednesday charged 8 individuals living in and around Griffin, GA, for their involvement in an insider trading ring that generated over $500,000 in illegal profits. Backgrounds of Respondents.

• Thomas Melvin, Jr., 45, is a CPA and principal of an accounting firm - Melvin, Rooks, and Howell PC.
• Michael Cain, 43, has been an RR with Morgan Stanley Smith Barney since November 2009.  Prior to that, he was with Morgan Keegan (2004-2009), AG Edwards (1995-2004) and Merrill Lynch (1991-1995).  Melvin has been Cain’s accountant for over 15 years.
• Joel Jinks, 51, a one-time candidate for local sheriff, works as a general contractor.  Melvin is Jinks’ longtime accountant and a close friend of Melvin’s.
• Peter Doffing, 46, an insurance broker since November 2009, has been employed at an insurance broker that provides insurance and risk management services.

SEC Findings and Allegations. Local accountant Thomas Melvin, Jr. allegedly exploited confidential information from a client who was on the board of directors at Chattem Inc., a TN-based pharmaceutical company known for such OTC products as Allegra, Gold Bond, and Icy Hot. In late 2009, French pharmaceutical manufacturer Sanofi-Aventis Inc. made a tender offer to purchase the Chattem, and shortly thereafter Melvin’s client sought his professional advice on the financial impact of his Chattem stock options being involuntarily exercised due to a change in control of the company. The SEC notes that the Chattem board member made clear to Melvin during their private conversations and meetings that the topic of discussion was confidential.  The board member shared the likely increase in stock price ($20 - $25 per share) as well as its potential timing. Nonetheless, Melvin passed this non-public confidential information to 4 of his friends and associates, who then knowingly traded on that information ahead of the public announcement of the merger.  Some tipped others who traded illegally as well.  The 4 tippees were:

• Roan Berry – Melvin’s friend.
• Michael Cain – Melvin’s friend.
• Joel Jinks – Melvin’s friend.
• Jeffrey Rooks – Melvin’s longtime accounting partner.

Berry then allegedly tipped his friend and neighbor, Ashley Coots who, in turn ,tipped his friend and former co-worker Casey Jackson. MSSB registered rep Cain tipped his friend Peter Doffing, and purchased out-of-the-money call options based on the nonpublic information. SEC Sanctions. Four of the eight men settled SEC charges by agreeing to pay back all of their ill-gotten gains plus interest and penalties - for a combined total of $175K. Berry paid the largest amount - $55K in disgorgement, $5K in prejudgment interest, and $55K in penalties - $115K in total. Rooks - the CPA partner, also will be prohibited from appearing or practicing before the SEC.  His sanction reflects credit given to him for his cooperation and substantial assistance to the investigation. The SEC will proceed with its litigation against Melvin, Cain (registered rep), Doffing, and Jinks. SEC Atlanta Regional Office Staff Credits. Investigation by Staff Attorney William Dixon, Senior Trial Counsel Kristin Wilhelm, Ass't Reg'l Director Aaron Lipson.  Ms. Wilhelm will lead the ongoing litigation. The SEC acknowledges assistance provided by FINRA and CBOE. For further details, go to: [SEC PR 12-167, 8/28/12] and these SEC Complaints: [Complaint v. Melvin, Cain, Jinks, and Doffing] [Complaint v. Berry] [Complaint v. Coots] [Complaint v. Jackson] [Complaint v. Rooks]