SEC Charges California-Based Hedge Fund Analyst and Two Others with Insider Trading

March 26, 2013

The SEC brought administrative charges against Matthew Teeple of San Clemente, California for insider trading. The SEC alleges that he was tipped in advance of a July 2008 announcement that Foundry Networks Inc. had agreed to be acquired by Brocade Communication Systems Inc. for approximately $3 billion.


The SEC stated that Teeple’s source was Foundry’s chief information officer David Riley, a friend who Teeple had previously given investment advice. According to the SEC, Teeple then caused the San Francisco-based hedge fund advisory firm where he works to buy Foundry shares in large quantities in the days leading up to the public announcement, and the hedge funds managed by the firm reaped millions of dollars in profits when Foundry’s stock value increased upon release of the announcement. Teeple also tipped a Denver-based investment professional John Johnson who he befriended through a previous working relationship, and Johnson made illegal trades based on the nonpublic information. Riley also tipped Teeple in advance of at least two other major announcements by Foundry, and Teeple’s firm traded on the nonpublic information to make profits or avoid losses.

In a separate action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Teeple, Riley and Johnson.

According to the SEC’s complaint filed in federal court in Manhattan, Riley tipped Teeple on the morning of July 16 about Brocade’s impending acquisition of Foundry. Teeple immediately shared this information with colleagues at his firm as well as Johnson and several others who purchased Foundry stock, often within minutes of communicating with Teeple. Foundry stock climbed approximately 32 percent after the public announcement of the merger on July 21.

Please click here for the SEC’s complaint.


Categories

Enforcement Actions, Investment Advisers, Investment Companies