The U.S. Securities & Exchange Commission today dinged an outside investor relations executive with insider trading charges, accusing Kevin McGrath of Cameron Assoc. of "trading on confidential information he learned about two clients while he helped prepare their press releases."
The SEC said McGrath edited a Misonix (NSDQ:MSON) press release divulging "disappointing" financial results in 2011, then sold his MSON shares shortly before the release hit the wires, avoiding a $5,400 loss when the share price then plunged some 22%.
The SEC also accused McGrath of using his press release work with Clean Diesel (NSDQ:CDTI) to cash in ahead of news of $2 million in new orders for the emission controls company. The avoided losses from the Misonix stock sale and the purchase of CDTI shares netted a total of $11,776 for McGrath, according to the securities watchdog.
McGrath agreed to settle the charges by paying disgorgement of $11,776, prejudgment interest of $1,492 and a penalty of $11,776, for a total of $25,044, but did not admit to any wrongdoing, according to a press release. The settlement bars McGrath from trading in clients’ shares within a 1-year period of performing any investor relations services.
"Investor relations firms owe their clients a duty to maintain in strict confidence the important and sensitive information that clients impart for the sole purpose of obtaining help and advice on how best to communicate forthcoming news to investors," Andrew Calamari, director of the SEC’s New York Regional Office, said in prepared remarks. "McGrath’s self-centered misconduct betrayed both his own firm and his firm’s clients whose confidential information he exploited for personal gain."
"McGrath used one hand to help clients draft their press releases while using the other to trade illegally in their stock," added Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office. "This settlement imposes additional trading limitations on McGrath in the form of a conduct-based injunction to ensure that he doesn’t commit the same transgression again."