The leading association for the stock and executive compensation profession
Join a professional community 6,000+ members strong
Continue your investment in your professional development and community
Our member care center is here to assist you
Country-specific guidance for stock plan design and administration
Connect with a chapter in your area
Learn more about and engage your peers
Attend an NASPP event for unbeatable professional development and networking
Ask, find and provide answers to burning industry questions
Professional development to keep you at the top of your game
Expert industry perspectives and guidance for your daily work
Enrich you career and discover new opportunities
Be there for the 27th annual event Sept. 16-19, 2019 in New Orleans!
We think of SEC documents as a snore, but the complaints issued by the SEC's enforcement division can be more interesting than you think. Today I look at a recent complaint related to insider trading that illustrates how important it is to make sure employees understand the laws in this area.
In the complaint (SEC vs. Toby G. Scammell), the SEC alleges that Toby Scammell, an employee of an investment fund, found out about Disney's acquisition of Marvel Entertainment before the deal was announced publicly (by sneaking a look at his girlfriend's Blackberry), purchased call options on Marvel, and then sold them at a 3,000% profit after the deal was announced.
This is a good case for me to write about because, as far as I can tell from the complaint, Disney wasn't in any way at fault for this. Scammell didn't work for Disney and his girlfriend, who did work for Disney as an extern, didn't voluntarily give the information to him. So I don't have to suggest that an NASPP member had less than perfect procedures (I'm sure all of you are perfect anyway).
There are many things that are interesting about this case and there's definitely some entertainment value in reading the complaint (or at least the SEC's summary of it). What I find most interesting is that Scammell isn't some high level executive or celebrity (a la Martha Stewart) and, although he realized a 3,000% profit, his investment apparently wasn't that much to begin with, because that only worked out to around $200,000. On the surface, the whole thing hardly seems worth the SEC's time, but not only is the SEC pursuing the case, it has garnered a fair amount of attention from the media.
And this is exactly why you have an insider trading compliance policy and why you want to make sure all your employees, not just your executives, understand it. Even if your employees aren't subject to black-out periods and don't regularly have access to material, non-public information, it is important that they understand what insider trading is, that it is prohibited by law, what the penalties could be, and your company's insider trading compliance policy. You just never know what someone is going to overhear or come across--a confidential document could be left out on a copier, for example.
Insider Trading = Bad News for Everyone
Here's why you don't want your employees to be prosecuted for insider trading:
Your insider trading compliance policy is not just ceremonial or a formality. It is an important policy that protects both the company and its employees. A key part of your stock plan education program is to make sure employees understand this policy, even if they aren't subject to black-out periods, and understand the types of transactions that are prohibited by law and by your policy.
For more information on insider trading compliance polices, check out this month's Compliance-O-Meter quiz.
NASPP "To Do" ListWe have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing "to do" list for you here in my blog.
Here are the results to my random questions in last week's blog entry.
Terminated Employees &...Read More
The Supreme Court and Insider Trading
Earlier this year I blogged about the fact that insider trading isn't technically illegal. It sounds far fetched, but it's true. There isn't a law on the books that specifically defines insider ...Read More
Insider Trading Isn't Illegal?
I think it's safe to say that if you work in this industry, you're familiar with the concept of insider trading. What do we know? You can't trade in a company's stock based on material non-publi...Read More
There's a Reason They Call it "Insider" Trading
This is a topic I've covered in the past: blatant insider trading; colorful schemes to profit from material, non-public information; even the SEC's recent and ongoing Read More
Husband and Wives Insider Trading
We've covered the range of insider trading cases in past editions of the NASPP Blog - ranging from employees gone rogue with inside information, to the accidental tipping off of friends during a...Read More