By R. Jason Howard, J.D.
A former Goldman Sachs associate has been charged by the SEC with insider trading for his use of client nonpublic information in a scheme which garnered more than $450,000 in illicit profits (SEC v. Han, November 24, 2015).
Background. The SEC’s complaint alleges that Yue Han illegally traded securities based on material, nonpublic information he obtained through access he was given to investment banker emails as part of his employment in Goldman Sachs’ Surveillance Analytics Group between July and October 2015.
During that time period, Goldman advised companies on mergers and acquisitions, including tender offers, and other transactions. Han was able to access the confidential information about four impending M&A deals, and with that information he then purchased stock or stock options in advance of the deal announcements and sold them for substantial profits shortly after the announcements were made public.
Detection center. The case against Han stems from the SEC’s Market Abuse Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns such as improbably successful trading across different securities over time. These enhanced detection capabilities enabled SEC enforcement staff to spot Han’s unusual trading activity in two different accounts.
The SEC press release quoted Joseph G. Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, as saying: “We allege that Han’s employer gave him access to confidential information so that he could help the firm detect and deter illegal activity, but he betrayed that trust by using the information for his own profit. Fortunately the SEC staff’s probing analysis uncovered Han’s suspicious trading and enabled us to obtain an asset freeze before he could dissipate his ill-gotten gains.”
Relief sought. Han is charged with violating the Exchange Act, and the SEC has obtained an emergency order freezing Han’s assets and accounts in the name of the relief defendant, Wei Han. The complaint seeks to permanently restrain and enjoin Han and all persons in active concert or participation with him from violating the Exchange Act and seeks disgorgement with prejudgment interest of all illicit trading profits or other ill-gotten gains, including all profits made from trades in the Wei Han account
The case is No. 15-cv-9260.