Ex-Oppenheimer Broker Pleads Guilty in Insider Trading Case

David Hobson, an ex-Oppenheimer & Co (OPY) investment adviser, has pleaded guilty to the criminal charges of securities fraud and conspiracy to commit securities fraud. The 47-year-old Rhode Island broker admitted that he engaged in insider trading using information given to him by investment client Michael Maciocio in order to make illegal profits. Maciocio has already pleaded guilty to the charges in the insider trading case against him.

According to Preet Bharara, the United States Attorney for the Southern District of New York, between 5/2008 to 4/2014 Hobson and Maciocio sought to trade on insider information regarding acquisitions that a particular pharmaceutical company was considering. Although Bharara’s release doesn’t name the company, Law360 identified the company as Pfizer Inc. Bharara said that Maciocio, who was master planner in Pfizer’s active pharmaceutical ingredient supply chain group, would find out about the upcoming acquisitions and tip Hobson.

Bharara’s statement said that even though Maciocio was not given access to the acquisitions that the pharmaceutical company was targeting, he would use the code name of the acquisition, the drug indication, the dose, the clinical trial phase, and/or the drug’s chemical structure to find out the name of the company that Pfizer was considering acquiring. Maciocio would trade based on this information and share the information with Hobson. The two men have been friends since childhood.

Hobson profited from trades he made in a number of the securities, making over $350K in ill-gotten gains for himself, some of his clients, and for Maciocio. Hobson used the insider information to trade in client accounts not just at Oppenheimer but also at RBC Capital Markets where he also worked.

For the conspiracy to commit securities fraud conviction, Hobson faces up to five years in prison and a $250K maximum fine, or twice the gross loss or gain from the criminal offense. For the securities fraud conviction, he faces up to 20 years behind bars and a $5M maximum, or, again, twice the gross loss or gain from the offense.

In other insider trading news, the U.S. Securities and Exchange Commission has charged James C. Cope in a civil case. The regulator claims that the Tennessee-based attorney, who was on Pinnacle Financial Partners’s (PNFP) executive committee of the board of directors, made over $56K in ill-gotten gains when he bought securities in Avenue Financial Holdings, which Pinnacle was targeting for acquisition. Cope made the trades before the two banks publicly announced the deal.

The SEC said that Cope found out about the confidential details regarding the intended merger during a January 2016 meeting. He made his first order to buy the Avenue Financial stock while the meeting was taking place. Within the first hour of the meeting’s conclusion, he made four more stock purchases. Cope stepped down from Pinnacle’s board earlier this year.

The regulator is accusing Cope of ignoring his responsibilities as a public company director and lawyer. The SEC’s complaint is charging him with violating the Securities Exchange Act of 1934’s Section 10(b) and Rule 10b-5.

Last week, Cope pleaded guilty to criminal charges accusing him of insider trading. As part of his plea deal, Cope will spend 24 months under probation—nine moths of that will be under home confinement—and will pay a $50K fine.

The SSEK Partners Group is a securities fraud law firm.

Investment Adviser Pleads Guilty in Manhattan Federal Court to Insider Trading, DOJ, October 25, 2016

SEC Charges Board Member with Insider Trading During and After Board Meeting, SEC, October 21, 2016

The SEC Complaint in the Cope Case (PDF)