Hedge Fund Manager Fined $2m for Insider Trading

Jack Humphrey, Regulatory journalist
September 03, 2012 /

A district court in New Jersey has convicted a hedge fund firm Clay Capital Management, LLC and its former Chief Investment Officer guilty for their roles in an insider trading scheme involving the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc.

The Court ordered Clay Capital and Turner to pay $2.1 million in illicit gains.

The complaint, filed by the US Securities and Exchange Commission, alleged that James F. Turner II traded in advance on leaked information about Autodesk’s planned acquisition of Moldflow. Turner’s brother-in-law, a director at Autodesk, tipped Turner with inside information about Autodesk’s plan before its public merger announcement on May 1, 2008 and about Autodesk’s fourth quarter 2008 earnings in advance of Autodesk’s public earnings announcement in February 2008, the SEC said.

The complaint further alleged that Turner’s close friend, a manager at Salesforce, tipped him with confidential information about Salesforce’s performance in advance of Salesforce’s public earnings announcement in February 2008. 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. In total, the traders made illicit gains 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 for the District of New Jersey and was sentenced in April 2012 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. U. S. v. James Turner, Case No. 2:11-cr-00868 (D.N.J.).

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.

 

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