SEC Charges Advisory Firm Owner Tibor Klein and Stockbroker Michael Shechtman with Insider Trading Ahead of Merger Announcement

SEC v. Tibor Klein and Michel R. Shechtman, Case No. 9:13-cv-80954 (S.D. Fla.).  On September 20, 2013, the SEC announced insider trading charges against Tibor Klein, president of Klein Financial Services and his stockbroker friend Michael Shechtman.  The SEC alleges that one of Klein’s clients, a lawyer with King Pharmaceuticals, tipped Klein with confidential information about Pfizer’s anticipated acquisition of King Pharmaceuticals.  Klein started buying a lot of King Pharmaceuticals’ stock right away.  According to the SEC, Klein also tipped his best friend, Shechtman, with the confidential inside information about King Pharmaceuticals.  Shechtman applied to open an options trading account even though he had never before traded in options.  The SEC alleges that Klein spoke with Shechtman numerous times as Shechtman purchased King Pharmaceuticals’ stock and 300 call options.  He also bought shares in his wife’s Roth IRA account.  After the companies announced the acquisition, King Pharmaceuticals stock rose significantly netting Klein profits of $328,375.02 and Shechtman profits of $109,040.53.  The SEC’s charged Klein and Shechtman with violations of Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3.  The SEC seeks disgorgement, civil monetary penalties, and injunctive relief.

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