Seven corporate executives in industries ranging from retailing to energy to data processing are under investigation by the FBI and the SEC for possible trading violations in their own companies’ stock.
The traditional focus of insider trading investigations involve outside investors. This investigation is focusing on corporate insiders, especially those who have pre-arranged plans to trade their own companies' shares.
This Website Is For Financial Professionals Only
The Wall Street Journal published an article on November 28 that highlighted highly favorable transactions by corporate executives before bad news about their companies hit the market.
The executives under investigation include Big Lots, Inc. CEO Stephen Fishman and VeriFone Systems, Inc. CEO Douglas Bergeron.
Both companies say their top executives’ trades were properly made during a time when such trading was allowed.
The pre-arranged plans are known as 10b5-1 plans and they allow executives to trade their stock at a specific time and price without consideration of the information they have as insiders.
Utilizing 10b5-1s can be a favorable defense against accusations of improper trading. But it does not fully exonerate the executives who use them.
The plans can be set up even at a time when top executives know inside information. The plans do not have to be disclosed and changes can be made, also without disclosure.
Seven such trades have been identified and are under investigation
. The other entities involved are:
1. Body Central founder Jerrold Rosenbaum and chief merchandising officer Beth Angelo, his daughter
2. Cardtronics, Inc.’s former managing director of UK operations Ronald Delnevo
3. Micrel, Inc. CEO Raymond Zinn
4. Mohawk Industries, Inc. CEO Jeffrey Lorberbaum
5. Cobalt International Energy co-founder Samuel Gillespie