Two brokers face more charges from SEC

By Stephanie Ostrowski | Jan 7, 2013

WASHINGTON (Legal Newsline) - Two brokers who traded nonpublic information before IBM Corporation's acquisition of SPSS Inc. are facing additional charges.

Research analyst Trent Martin is now being charged through an amended complaint filed in Manhattan federal court Dec. 26 by the Securities and Exchange Commission.

According to the SEC, Martin is responsible for sharing confidential information in an insider trading scheme that yielded more than $1 million in illicit profits.

While employed at the brokerage firm in Connecticut and specializing in Australian equity investments, Martin learned inside information about the pending IBM-SPSS agreement from an attorney friend who was involved in the deal.

The SEC alleges Martin's attorney friend expected him to keep the information confidential and was simply seeking moral support, reassurance and advice when they privately discussed the lawyer's new assignment with IBM-SPSS. The intentions were not to conduct any illegal trading or disclosing the information to others.

Such detail that the lawyer shared with Martin included the anticipated transaction price and the identities of the acquiring and target companies, according to the SEC.

Martin used the nonpublic information to his benefit and purchased SPSS securities, and also shared the information with his roommate, Thomas C. Conradt, who then traded and tipped his friend and fellow retail broker, David J. Weishaus.

Conradt and Weishaus specifically named Martin as their source in instant messages about their illegal trading. Once Martin learned of the SEC's investigation, he fled to Australia and currently lives in Hong Kong, according to the SEC.

"Martin could run but he could not hide, as the long arm of the SEC will extend to those who flee the United States hoping to avoid the consequences of their unlawful conduct." said Daniel M. Hawke, Director of the SEC's Philadelphia Regional Office.

On Nov. 29, the SEC charged Conradt and Weishaus with insider trading.

On the first business day after receiving the nonpublic information, Martin attempted to purchase SPSS common stock, according to the SEC's complaint. However, the first three orders were cancelled due to insufficient funds in his account to make the purchases. Martin then wired $50,000 from his checking account into his brokerage account to proceed with the SPSS shares purchase.

In the SEC's complaint, Martin, Conradt and Weishaus allegedly violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, and a permanent injunction against the brokers.

The SEC investigation is ongoing in the Philadelphia Regional Office where litigation will also occur.

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