Dive Brief:
- The Securities and Exchange Commission charged former Comtech Telecommunications CEO Ken Peterman with insider trading, alleging that he sold shares in the company prior to the release of negative quarterly earnings results.
- Peterman allegedly defied a blackout period and sold Comtech shares on March, 12, 2024, just hours after being told he was being terminated for cause and eight days after receiving a presentation detailing the earnings results, the SEC said in a release Wednesday.
- “There is no gray area when it comes to trading on the basis of material non-public information in breach of one’s fiduciary duty,” Tejal Shah, associate director of the SEC’s New York Regional Office, said in a statement. “C-suite executives like the defendant, a CEO with decades of experience, know that it is illegal to use their company’s confidential information for their own financial gain,” he said.
Dive Insight:
The charges against Peterman are just the latest initiative by what, in some respects, is the most aggressive SEC enforcement division on record.
During fiscal year 2024 the SEC obtained $8.2 billion in financial remedies — the highest in agency history — stemming from 583 enforcement actions, the SEC said last month. The total included $6.1 billion in disgorgement and prejudgment interest, also a record.
SEC targets ranged from fraudsters using social media to promote financial scams; companies that broke whistleblower protection rules; and broker-dealers, investment advisers and credit rating agencies that failed to avert off-channel communications by staff.
The SEC in March alleged that Andreas “Andy” Bechtolsheim, the founder of Arista Networks, engaged in insider trading. To settle the charges, Bechtolsheim agreed to pay a civil penalty of nearly $1 million, the SEC said.
In its most recent filing, the SEC alleges that Peterman sold company stock soon after his termination from Comtech and while aware of the imminent earnings release.
Peterman avoided about $12,445 in losses by trading before the March 18, 2024 announcement of earnings, when company stock fell more than 25%, the SEC said.
Peterman allegedly told his financial advisor to sell additional shares held in a joint account, but a trading blackout prevented the sale, the agency said. Had the sale gone through, Peterman allegedly would have avoided about $110,000 in losses.
Peterman was arrested on Wednesday in San Diego and will be arraigned in the Eastern District of New York at a later date, the U.S. Attorney’s Office for the Eastern District said Wednesday in a statement.
Peterman faces up to 25 years in prison if convicted of securities fraud, and up to 20 years in prison if convicted of wire fraud. He could not immediately be reached for comment.
“My office will vigorously prosecute those, like Peterman, who would seek to enrich themselves at the expense of ordinary investors and the integrity of the securities markets,” Breon Peace, U.S. Attorney for the Eastern District of New York, said in a statement.
