Sigma Capital Management has agreed to pay $14 million (£9.2 million) to settle charges for insider trading relating to Dell and Nvidia earnings calls, following a Securities and Exchange Commission (SEC) investigation.
The SEC said that hedge fund advisory firm Sigma Capital Management, an affiliate of SAC Capital, engaged in insider trading using information obtained through former analyst Jon Horvath.
Horvath is said to have provided hedge fund managers with non-public details relating to quarterly earnings at Dell and Nvidia, having received inside information from a group of hedge fund analysts. Horvath agreed to settle with the SEC in an agreement earlier this month.
Using the confidential information, Sigma Capital was able to trade Dell and Nvidia securities ahead of earning calls during 2008 and 2009.
The SEC said that the inside information held by Hovarth differed significantly from the predictions of market analysts, which were armed with publically available knowledge.
“Sigma Capital’s violations of the securities laws were blatant and recurring,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “The firm obtained key quarterly earnings information before it was public and exploited an unfair edge over the rest of the market to reap millions of dollars in unlawful gains.”
Leveraging the confidential information Sigma Capital traded Dell and Nvidia shares prior to four quarterly earnings announcements. These deals generated over $5.2 million for the hedge fund Sigma Capital Associates.
Furthermore Horvath’s information helped SAC Select Fund avoid losses of more than $1 million (£0.7 million).
“Quarterly revenues and profit margins are fundamental drivers of stock prices. By illegally obtaining these vital financial measures in advance of their public announcement, Sigma Capital secured a crystal ball revealing where the stock would likely be trading in the near future,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. “However, the crystal ball failed to predict a costly settlement with the SEC.”
The SEC also announced on Friday that it ordered SAC Capital to pay a record US$614 million (£406.7 million) in a separate insider trading case relating to information obtained regarding a pharmaceutical firm, as reported by CFO World.
Dell is one of a number of tech companies named in SEC insider tradings probes. Galleon founder Raj Rajaratnam received 11 years in prison following the trading of shares using inside knowledge of companies such as AMD, Intel and IBM to generate $64 million (£42 million) in profits and losses avoided.