SEC Charges Equity Research Firm Founder Tai Nguyen with Insider Trading

Securities and Exchange Commission v. Tai Nguyen, Case No. 12-CIV-5009 (S.D.N.Y.).  On June 26, 2012 the SEC charged Tai Nguyen, owner of equity research firm Insight Research, with insider trading.  The Nguyen case stems from the SEC’s investigation of “expert networks,” which provide specialized information to investment firms.  To date, the SEC has charged 23 defendants due to the expert networks investigation.  The SEC claims that the expert networks insider trading has amassed more than $117 million in illicit gains, mainly in shares of technology companies such as Apple, Dell, Fairchild Semiconductor, and Marvell Technology.

As for the Nguyen case, the SEC alleges that from 2006 to 2009, Nguyen traded in the securities of Abaxis, Inc. using inside information he received from a close relative who is an employee in Abaxis’s finance department.  Nguyen traded for himself in advance of the company’s quarterly earnings announcements, allowing him to collect about $145,000 in illicit profits.  In addition, Nguyen passed inside information to Barai Capital Management and Sonar Capital Management, two hedge fund management firms that were his clients.  These hedge fund management firms caused the hedge funds they managed to trade Abaxis securities based on the material nonpublic information that Nguyen provided and reaped more than $7.2 million in illicit profits and avoided losses for those hedge funds.  Nguyen is charged with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  The SEC is seeking injunctive relief, civil monetary penalties and disgorgement of ill-gotten gains, plus interest.

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