Don’t Share Material Non-Public Information with Your Sister-in-Law

Al Tobia was an insider at two publicly traded companies, obtained material nonpublic information about potential corporate transactions involving three other publicly traded companies. With that information, Tobia tipped his sister-in-law who purchased shares of these three companies in her brokerage account and in an account held by her elderly parents. At least according to the complaint filed against them by the Securities and Exchange Commission.

The source is suspicious trading.

In one of the instances, Lee purchased 102,000 shares in her parents’ account for $765,000. That was half of the account value at the time. Two weeks later the share price rises 26% based on the disclosure of a potential acquisition.

I’m sure the brokerage’s compliance team raised a red flag on the transaction and alerted FINRA and the SEC. Then they dived deeper into the trading of this account and Lee’s own account. That revealed other suspicious transactions.

They get phone records and tie calls to the dates and times that Lee traded. Discovered the calls were with Tobia and that he is her brother-in-law.

They sensibly settle and pay penalties. Tobia gets banned from serving as an officer or director of a public company for five years.

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