New York Adviser Charged with Insider Trading

September 21, 2013

The SEC brought an administrative actions against Tibor Klein, the owner of a New York-based advisory firm, claiming that he engaged in illegal insider trading in his own account and client accounts based on non-public information in advance of a merger announcement by pharmaceutical companies. Klein is president of Klein Financial Services. According to the SEC, he learned confidential information about Pfizer Inc.'s planned acquisition of King Pharmaceuticals. The SEC found that he misappropriated the information and traded in advance of the public announcement for illicit profits of more than $300,000 for himself and his clients.  The SEC also charged Klein's close friend Michael Shechtman, a stockbroker living in South Florida who was tipped by Klein and traded on the non-public information for more than $100,000 in illegal profits.
The SEC stated that Klein learned material, non-public information about the impending merger in August 2010 from one of his clients, an attorney who works on matters for King Pharmaceuticals. On the first day that the markets opened after he learned the confidential information, the SEC stated that Klein began purchasing large amounts of King Pharmaceuticals' stock.
The SEC alleged that Klein then tipped his best friend, Shechtman, with the non-public information about King Pharmaceuticals. Shechtman submitted an application to open an options trading account. Shechtman had never before traded in options. On August 18, Klein called Shechtman 11 more times as Shechtman purchased 2,500 shares of King Pharmaceuticals stock and 300 call options in his personal account, and 2,400 shares in his wife's Roth IRA account.
According to the SEC, the public announcement was made on October 12, 2010. King Pharmaceuticals stock subsequently rose 39% and trading volume increased by more than 12,000% from the previous day. Following the announcement, Klein sold his King Pharmaceuticals stock and generated profits of $328,375.02 for himself and his clients. Shechtman sold his shares and his wife's share in King Pharmaceuticals stock and options for profits of $109,040.53.
Click here to access the enforcement action.


Categories

Investment Advisers