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According to the Director of the SEC"s Boston Office, "Country clubs or similar venues may give people a false sense of security that leads them to think they can get away with trading on unlawful stock tips ... But as in any social setting, people who trade securities based on confidential information they receive are taking a huge risk that their illegal tipping and trading will be identified by the SEC.”

 

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It was certainly a huge risk for a former bank executive. Today, the Securities and Exchange Commission charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank’s acquisition of another financial institution.

 

According to the SEC's press release, the SEC alleges that  a former a senior vice president at Eastern Bank, learned through his job responsibilities that his employer was planning to acquire Wainwright Bank & Trust Company.  That former VP tipped a friend and fellow golfer with whom he socialized at a local country club.  In the two weeks preceding a public announcement about the planned acquisition, the friend sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities.  The friend had never previously purchased Wainwright stock.  After the public announcement of the acquisition caused Wainwright’s stock price to increase nearly 100 percent, the friend sold all of his shares during the next few months for nearly $300,000 in illicit profits.


According to the SEC’s complaint filed in federal court in Boston, regulators began requesting information from Eastern Bank and others about trading in Wainwright stock a few months after the trades occurred, and the former VP quit his job at Eastern Bank rather than respond to such inquiries. Both men were subpoenaed to testify in the SEC’s investigation but asserted their Fifth Amendment privileges against self-incrimination for every question asked of them, including whether they know one another.

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