WASHINGTON (Legal Newsline)- A former executive at Yahoo! Inc. and a former mutual fund manager at a subsidiary of Ameriprise Financial Inc. were accused Monday by the Securities and Exchange Commission in a civil action with insider trading.
The SEC alleges that Robert W. Kwok, who was Yahoo's senior director of business management, allegedly informed Ameriprise's Reema D. Shah in July 2009 of a pending deal between Yahoo and Microsoft. Shah had made inquiries to Kwok when there were rumors about a partnership between the two companies, the SEC says.
Kwok confirmed the reports and told Shah the information was confidential, the SEC says. Shah bought more than 700,000 shares of Yahoo stock that were later sold for profits of approximately $389,000.
The SEC further alleges that a year earlier, the roles were reversed. Shah told Kwok about nonpublic information regarding an impending acquisition announcement between two other companies, Kwok made a profit of $4,754 as a result of that information, it is alleged.
Kwok and Shah have agreed to settle the SEC's charges. Financial penalties and disgorgement will be determined later. Shah will be permanently barred from the securities industry. Kwok will be permanently barred from serving as an officer or director of a public company.
"Kwok and Shah played a game of you scratch my back and I'll scratch yours," said Scott W. Friestad, Associate Director in the SEC's Division of Enforcement.
"When corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors."
The two also pled guilty to conspiracy to commit securities fraud in a criminal case also announced Monday. Both will be sentenced by the U.S. District Court for the Southern District of New York.
According to the SEC, the two first met in January 2008 when Shah was attending a real estate conference in California at the same facility where Yahoo was holding a meeting. They allegedly began discussing their respective businesses, and continued their relationship by phone or in person.
Kwok allegedly furnished Shah with information about Yahoo. Shah reciprocated by giving tidbits of information to Kwok, which he used for his personal investments, the SEC says.
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