SEC Charges STEC Inc. Sales Director with Insider Trading

Jack Humphrey, Regulatory journalist
January 18, 2012 /

The Securities and Exchange Commission has charged a sales director at Santa Ana, Calif.-based data storage manufacturer STEC Inc. with insider trading in company securities based on non-public information he learned on the job.

The SEC’s complaint filed on January 13, 2012 in the U.S. District Court for the Central District of California, alleges that Farzin Bazshushtari, who lives in Mission Viejo and is STEC’s Director of Industrial Distribution, purchased 7,000 STEC shares on April 27, 2009, after learning about STEC’s positive first quarter financial results.

When those results were announced publicly on May 11, STEC’s stock price jumped 30 percent.

The SEC further alleges that Bazshushtari purchased another 5,500 shares on May 27, 2009, after seeing internal weekly sales reports indicating that STEC would outperform second quarter guidance.

He additionally purchased 200 STEC call options on June 10. When the company publicly increased second quarter revenue guidance on June 16 to reflect the surging sales, STEC’s stock price jumped 26 percent.

According to the SEC’s complaint, Bazshushtari made total profits of $76,676.50 by trading on inside information. Bazshushtari knew that he violated company policies when he placed the trades. His April 27 purchase was made during a “blackout” period when STEC employees were prohibited from trading in company stock.

He purchased STEC call options despite STEC employees being prohibited from trading in STEC options, which give holders the right to buy or sell shares in the future. Bazshushtari further violated STEC’s written insider trading and ethics policies when he traded on margin and held his STEC securities in a margin account.

Bazshushtari agreed to settle the SEC’s charges by paying $76,676.50 in disgorgement and a $76,676.50 penalty. Bazshushtari also has consented without admitting or denying the SEC’s allegations to a permanent injunction from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

 

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