Insider trading: Lawyer passed deal info to friend
The Securities and Exchange Commission has charged a Canadian citizen from the Toronto area with insider trading, alleging that he generated nearly USD10 million in illicit gains by using confidential information to trade ahead of merger and acquisition transactions. The allegations go back to 1994.
The SEC alleges that Stanko J. Grmovsek used inside information passed to him by his former law school classmate Gil I. Cornblum to trade on U.S. exchanges through foreign accounts.
Approximately USD8.5 million of the illegal profit was attributable to trading on U.S. markets, and the illegal trading occurred from 1994 to 1998 and then again from 2004 to 2008.
Grmovsek traded in advance of as many as 40 public announcements of merger and acquisition transactions using non-public information that Cornblum (deceased) learned through his work as an attorney with major law firms, including Dorsey & Whitney LLP and Sullivan & Cromwell LLP.
The SEC's complaint charges that Grmovsek breached the anti-fraud provisions of the Securities Exchange Act of 1934, including specific provisions that prohibit trading while in possession of material, non-public information about tender offers. Without admitting or denying the SEC's allegations, Grmovsek agreed to pay disgorgement of USD8.5 million with a waiver of all but nearly USD1.5 million of that amount based on his current financial condition.
According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the scheme involved trading in both U.S. and Canadian markets. Grmovsek used the inside information to make illicit trades through numerous Canadian accounts held in his own name and in the names of his friends and relatives, as well as through offshore accounts.
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