Retired Controller Returns to Save Firm, Insider Trades

The standard model for an insider trading case has traditionally been the corporate executive who works on a company deal or the upcoming earnings call and trades before the firm discloses the information. Typically, either profits are reaped, or losses avoided. Earlier this week, however, the Commission filed an insider trading case involving a Senior Index Manager that centered on trading in advance of resetting indexes at his firm by adding stocks to or taking them out of an index, not the traditional situation.

Now the agency has brought an insider trading case where the retired controller returned to aid his now floundering firm. Before saving the company, however, he saved himself by selling all of his stock and options after analyzing the firm’s books. SEC v. Kelly, Civil Action No. 1:20-cv-04449 (E.D.N.Y. Filed Sept. 23, 2020).

Defendant Edward T. Kelly is the retired controller of Aceto Corporation. After Mr. Kelly retired the firm had financial difficulties. In March 2018 Mr. Kelly returned to aid the company. After determining that the company had financial issues, he sold all of his firm shares and options. By trading while in possession of inside information he avoided losses of over $85,000.

The complaint alleges violations of Exchange Act Section 10(b). To resolve the action Mr. Kelly consented to the entry of a permanent injunction based on the section cited in the complaint. He also agreed to the entry of an order that bars him from serving as an officer or director of a public company and to pay a penalty of $170,228. See Lit. Rel. No. 24912 (Sept. 23, 2020).