SEC Charge Against GadGuido. On June 30, 2021, the Securities and Exchange Commission (the “SEC”) charged[1] Bay Area finance employee Mounir N. Gad for leaking non-public information to his friend Nathan E. Guido, conducting three insider trades. In total, Guido obtained $51,700 illicit profit, $11,000 of which he sent to Gad. Without admitting or denying the charges, both Gad and Guido agreed to settle the litigation by paying a civil penalty of $40,700 and $51,700, respectively.
The SEC claimed in the complaint[2] that Gad and Guido became friends in 2009 and maintained a close, personal friendship; they often socialized or vacationed together. During the relevant period, Gad served as vice president of a bank’s (the “Bank”) sponsor finance group and signed a confidentiality agreement not to disclose non-public information he obtained in his position.
In March 2015, Gad learned about a technology-focused private equity firm’s (PE Frim A) plan of acquiring Porcera Network Inc, a Delaware company, when the Bank he worked at provided loans to PE Firm A for the acquisition. Gad should know that the information about the acquisition was non-public, and he was bound by his confidentiality agreement not to leak it. However, he tipped Guido about this and repeatedly encouraged Guido to purchase Procera’s stock before the formal announcement of the acquisition. Guido knew that Gad worked for the Bank, and the information he provided was confidential. Still, he used the information to gain unfair advantages over other investors by purchasing 1,250 shared of Procera. Guido unjustly profited around $2,000 from this trade.
The success at Procera emboldened the defendants, and the size of their scheme grew. Gad tipped Guido about Imprivata’s acquisition in July 2016, and Guido purchased 4,419 stocks of it before it publicly disclosed the acquisition. On the next day, Imprivata’s stock price increased by approximately 30%, generating around $22,500 for Guido, who gave $5,000 to Gad for his information. Similarly, in August 2016, Gad again fed Guido with insider information about Sizmek, Inc.’s acquisition plan, helping Guido realize a $27,000 gain from trading its stock. Guido then withdrew $6,000 from his checking account and gave it to Gad.
Erin E. Schneider of the SEC says, “Gad had an obligation to keep his firm’s client deal information confidential… [h]e betrayed that trust by allegedly sharing information with Guido who used it unfairly to profit from market-moving news.”
Gad and Guido willfully traded on insider information, exploiting other investors’ interests for their self-benefit. The defendants’ behaviors violated 10(b) and 14(e) of the exchange act. Despite their efforts to cover up their conduct by hiding these trades among numerous other trades, Gad and Guido must face consequences for their actions.
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Reference:
[1]: https://www.sec.gov/news/press-release/2021-117
[2]: https://www.sec.gov/litigation/admin/2021/34-92306.pdf
