By Rodney F. Tonkovic, J.D.
A district court approved a nearly $2 million civil penalty against a former accountant at Domino's pizza charged with insider trading. The Commission alleged that the accountant traded ahead of a dozen earnings announcements and pocketed almost $1 million in illicit profits. Without admitting or denying the allegations, the accountant agreed to pay a $1,921,394 civil penalty and to a suspension from practice (In the Matter of Bernard L. Compton, Release No. 34-94769, April 21, 2022).
According to the Commission's complaint, Bernard L. Compton worked as an accountant at the corporate office of Domino's Pizza, Inc., from 2005 to 2021. Between 2015 and 2021, he held the position of Program Leader. In this position, Compton was responsible for preparing financial reports of revenues, profits, and earnings-per-share for use by Domino’s senior management.
Extra sauce. Because of his position, Compton had access to internal data used to prepare summaries of Domino's financial performance. This information included confidential financial data not yet publicly-released. Using this material, nonpublic information, Compton traded ahead of a dozen of Domino's earnings announcements between 2015 and 2020, making $960,697 from the illicit trades.
Specifically, the Commission said that Compton frequently bought "out-of-the-money" options. The options were purchased in seven different brokerage accounts belonging to himself and members of his family. He then sold them at a profit after the financial performance data was made public
"The SEC investigation uncovered that Compton allegedly accessed and reviewed Domino’s confidential data to prepare financial performance reports for senior management," said Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit. "Using innovative analytical tools, SEC staff exposed the defendant’s repeated misuse of this inside information and are now holding him accountable."
Final judgment. The court for the Eastern District of Michigan entered a final judgment order against Compton on April 19, 2022. Compton is permanently enjoined from violating the antifraud provisions of the Exchange Act and will pay a civil penalty in the amount of $1,921,394. Compton also agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.
The release is No. 34-94769.