Securities and Exchange Commission v. Clay Capital Management, LLC, et al., Case No. 2:11-cv-05020-DMC-JAD (D.N.J.). On August 29, 2012, the SEC announced it obtained final judgments against Clay Capital Management, LLC and its former Chief Investment Officer, James F. Turner II, for their roles in an insider trading scheme. The Court ordered Clay Capital and Turner to disgorge $2.1 million in illicit gains and permanently enjoined them from future violations of the antifraud provisions of the federal securities laws.
Turner’s brother-in-law, a director at Autodesk, tipped Turner with inside information about Autodesk’s planned acquisition in advance of a public merger announcement. Turner’s close friend, a manager at Salesforce, tipped Turner with confidential information before Salesforce’s public earnings announcement. Turner traded on the inside information in Clay Capital’s hedge fund’s account, his personal accounts and several family member’s accounts. Turner also recommended that several other friends and family members trade in the three companies’ securities. The traders made profits of nearly $3.9 million. In December 2011, Turner pled guilty to securities fraud in a related criminal action brought by the U. S. Attorney’s Office and was sentenced in to a prison term of twelve months followed by three years of supervised release and ordered to pay a fine in the amount of $25,000.
In the SEC action, Clay Capital and Turner consented to judgments permanently enjoining them from violating Section 17(a) of the Securities Act, Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the allegations, Clay Capital consented to an order for disgorgement of $1,062,822.36 plus prejudgment interest of $182,444.73, provided that all but $850,000 is waived based on its financial condition. Turner consented to an order for disgorgement of $2,585,241.94 plus prejudgment interest of $430,047.42, provided that all but $1,250,000 is waived based on his financial condition. Turner also has agreed to settle an administrative proceeding, to be instituted based on his criminal conviction and the entry of the permanent injunction, in which the Commission would bar him from associating with any broker, dealer, investment adviser, municipal securities dealer or transfer agent.