The Securities and Exchange Commission (SEC) has obtained an emergency court order to freeze assets of traders using foreign accounts to realize approximately $4.6 million in potentially illegal profits by trading in advance of the June 30, 2013 announcement that Onyx Pharmaceuticals, Inc. had received but rejected an acquisition offer from Amgen, Inc. The SEC alleges that unknown traders took risky bets that Onyx's stock price would increase by purchasing call options on June 26, 27 and 28 - the three trading days before the announcement. The emergency court order obtained on July 3, 2013 freezes the traders' assets related to the Onyx call options transactions and prohibits the traders from destroying any evidence. The SEC is seeking a final judgment ordering the traders to disgorge their profits with interest, pay monetary penalties, and permanently bar them from future violations.
According to the SEC complaint, certain unknown traders were in possession of material nonpublic information about the offer to acquire Onyx at a substantial premium over the stock price at the time they purchased Onyx call options, many of which were out-of-the-money, in the three trading days before the announcement. The complaint further stated that the timing and size of the trades were highly suspicious because they constituted large increases over the historical volume for those call options purchased. The SEC's complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5.
Generally, illegal insider trading is the act of buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about a company. Insider trading violations may also include "tipping" such information, trading by the person tipped - the "tippee," and trading by those who misappropriate such information. Section 10(b) of the Securities and Exchange Act of 1934 makes it unlawful for any person to "use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe." To implement Section 10(b), the SEC adopted Rule 10b-5, which makes it unlawful to engage in fraud or misrepresentation in connection with the purchase or sale of a security.
Robert Wayne Pearce, a former SEC Enforcement Attorney, has litigated SEC actions for over 33 years, including, but not limited to, insider trading, stock market manipulation, and other alleged violations of the Federal securities laws. Mr. Pearce defends companies and individuals who may be the subject of an SEC investigation or enforcement action regarding their alleged involvement in securities laws violations.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.
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