An SEC news release said the commission warned public pension officials that they can run afoul of anti-fraud and other securities laws provisions without such compliance mandates in place.
According to the announcement, the commission’s probe focused on possible insider trading in connection with RSA stock purchases of the Liberty Corporation because RSA traders had inside knowledge of potential acquisition of Liberty.
SEC investigators charged RSA learned about the M&A transaction because it was to provide financing for the acquisition and that the pension program did not have any program to ensure its investment staff understood and complied with the federal securities laws in general, or insider trading laws in particular. When the information became public, the value of RSA’s Liberty shares increased by more than $700,000.
“Today’s report reminds public pension funds of their obligations to prevent fraud and protect investors,” said SEC Chairman Christopher Cox, in the news release. “While public pension funds are exempt from most of the federal securities laws governing other money managers, they are not exempt from important anti-fraud provisions that prohibit insider trading and other manipulative and dishonest behavior that threatens the integrity of our markets. It is vitally important, therefore, that they have appropriate policies and procedures.”
Specifically, the SEC said RSA purchased the Liberty shares in August 2005, when RSA knew about a prospective acquisition of Liberty by Raycom Media, Inc. for a substantial premium over Liberty’s market price. RSA learned the confidential information in connection with arranging to serve as a source of funding to Raycom for the acquisition.
In resolving its inquiry into RSA’s trading with a Report of Investigation, the SEC said it took the following into consideration:
- RSA took remedial action that the Commission might have sought in an enforcement proceeding, including adoption of a compliance program and compensation to the sellers of the Liberty stock that it purchased.
- RSA cooperated in the investigation.
- RSA’s trading was directed by its CEO, who cooperated in the investigation and authorized RSA’s remedial action.
- No individual personally profited from RSA’s trading.
The SEC investigative report is here .
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