As we mentioned earlier this week, someone is going to jail. This guy didn’t even have the usual 6-9 months to spend the cash…
FOR IMMEDIATE RELEASE
Washington, D.C., Sept. 23, 2009 — The Securities and Exchange Commission today charged Richardson, Texas resident Reza Saleh with insider trading around the public announcement of Dell Inc.’s tender offer for Perot Systems earlier this week.
The SEC alleges that Saleh made increasingly large purchases of Perot Systems call options contracts based on material, non-public information that he learned in the course of his employment with, or duties for, two Perot-related private companies and Perot Systems. Immediately following the tender offer announcement on Monday, September 21, Saleh sold all of the call option contracts in the accounts and reaped approximately $8.6 million in illicit profits.
Later that same morning, SEC staff with assistance from the Options Regulatory Surveillance Authority identified Saleh as a suspicious trader. Soon after being contacted by SEC staff, Saleh acknowledged to a Perot Systems director that he knew about the impending transaction when he traded.
“The overwhelming evidence in this case allowed the SEC to move quickly against the trader before he could spend the huge profits from his illegal trading,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office. “The Commission is seeking a court order to freeze Saleh’s assets.”
According to the SEC’s complaint, filed in federal court in Dallas, Saleh purchased 9,332 Perot Systems call option contracts through two brokerage accounts between Sept. 4 and Sept. 18, 2009. The call option contracts were set to expire in October 2009 and January 2010. Saleh sold all of the call options following the announcement as Perot Systems’ stock price immediately increased by approximately 65 percent.
The SEC’s complaint charges that Selah violated the anti-fraud provisions of the Securities Exchange Act of 1934, including specific provisions that prohibit trading while in possession of material nonpublic information about tender offers. In addition to seeking an emergency asset freeze, the SEC has sought a preliminary injunction and a final judgment permanently Selah from future violations of the relevant provisions of the federal securities laws and ordering him to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.
The SEC’s complaint also names Amir Saleh of Richardson, Texas, as a relief defendant, in order to recover trading profits he received as a co-account holder on one of Reza Saleh’s brokerage accounts.
The Commission appreciates the assistance of the Options Regulatory Surveillance Authority. The SEC’s investigation is continuing.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.