SEC settles insider trading charges
29 October 2015 Arizona
Image: Shutterstock
The US Securities and Exchange Commission (SEC) has settled a case of insider trading and tipping against a senior figure of an Arizona real estate firm.
Mary Beth Knight was accused of abusing her position of senior vice president at Choice Hotels International to dump her shares in the company ahead of negative reports on the company’s earnings.
Knight also tipped off fellow shareholder Rebecca Norton, who then sold more than 3,000 shares of Choice Hotels stock over four days, and then short sold a further 500 shares for total profits and losses avoided of more than $44,000.
Despite not admitting or denying the allegations, Knight has agreed to pay $370,222 in total. The sum is made up of two disgorgements for both Knight and Norton’s avoided losses, as well as a civil penalty.
The SEC filed a civil action with the US District Court for the District of Arizona in May 2011, alleging: “ [Knight] attended a June 2006 meeting of executives at which disappointing projections of the company’s second quarter 2006 earnings results were discussed.”
“In breach of her duty to the company and its shareholders, Knight sold 12,000 shares of Choice Hotels stock, avoiding losses of more than $140,000 that she would have suffered if she had sold the stock at its closing price on 26 July 2006, the first day of trading after the company announced the bad earnings news.”
The final settlement included the SEC permanently enjoining Knight and Norton from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5.
Norton also accepted a settlement without admitting or denying the allegations in the complaint.
The district court must still determine whether a civil penalty will be applied to Norton at a later date and give its approval of the settlements.
Mary Beth Knight was accused of abusing her position of senior vice president at Choice Hotels International to dump her shares in the company ahead of negative reports on the company’s earnings.
Knight also tipped off fellow shareholder Rebecca Norton, who then sold more than 3,000 shares of Choice Hotels stock over four days, and then short sold a further 500 shares for total profits and losses avoided of more than $44,000.
Despite not admitting or denying the allegations, Knight has agreed to pay $370,222 in total. The sum is made up of two disgorgements for both Knight and Norton’s avoided losses, as well as a civil penalty.
The SEC filed a civil action with the US District Court for the District of Arizona in May 2011, alleging: “ [Knight] attended a June 2006 meeting of executives at which disappointing projections of the company’s second quarter 2006 earnings results were discussed.”
“In breach of her duty to the company and its shareholders, Knight sold 12,000 shares of Choice Hotels stock, avoiding losses of more than $140,000 that she would have suffered if she had sold the stock at its closing price on 26 July 2006, the first day of trading after the company announced the bad earnings news.”
The final settlement included the SEC permanently enjoining Knight and Norton from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5.
Norton also accepted a settlement without admitting or denying the allegations in the complaint.
The district court must still determine whether a civil penalty will be applied to Norton at a later date and give its approval of the settlements.
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