SEC Accuses Workers at UBS, Morgan Stanley Of Insider Trading
The Securities and Exchange Commission accused 14 individuals--including employees at two big brokerage firms--of insider trading, claiming they used tip-offs of upcoming analyst upgrades or corporate acquisitions that netted at least $15 million.
According to the complaint, employees at UBS Securities and Morgan Stanley traded nonpublic information in exchange for cash kickbacks in two related schemes.
The eight Wall Street professionals, two broker dealers, day-trading firm, and three hedge funds are accused of participating in a scheme that used information stolen from UBS and Morgan Stanley, the SEC said.
Securities regulators said the insiders communicated via coded text messages on disposable cell phones.
The SEC said from 2001 through 2006, Mitchel S. Guttenberg, an executive director at UBS, illegally tipped nonpublic information regarding his firm's upcoming analyst upgrades to Erik R. Franklin, a trader for Bear Stearns hedge fund Lyford Cay Capital, and David M. Tavdy, a trader at broker-dealer Andover Brokerage.
In addition, the complaint states that three registered representatives at Bear Stearns illegally traded on Franklin's tips. The agency alleged that the insiders profited from prior knowledge of UBS upgrades of Dow Chemical, National Semiconductor, Nvidia, and among others.
In the second scheme, Randi E. Collotta, then an attorney with Morgan Stanley, and her husband tipped inside information regarding corporate acquisitions to Marc R. Jurman, a registered representative at a broker-dealer in Florida. Jurman allegedly passed on that illegal information to Franklin two others at Bear Stearns who were also involved in the UBS insider trading scheme.
From 2004 to 2005, the SEC said, the Collottas tipped off Jurman to corporate acquisitions activity including Adobe Systems buyout of Macromedia in 2004, Johnson & Johnson's takeover bid for Guidant, as well as acquisitions of Argosy Gaming, Catellus Development and Pacificare Health Systems.