When you think insider trading, you think throwaway pre-paid phones, scribbles on napkins, and clandestine meetings under the dark of night.
For three Qualcomm sales managers accused yesterday by the SEC, all that was way too much work. From the SEC's press release:
The SEC alleges that Derek Cohen, Robert Herman, and Michael Fleischli learned through work e-mails that Qualcomm was planning a big announcement. A sales meeting later revealed that Qualcomm was negotiating an acquisition of Atheros Communications. Armed with the nonpublic information, all three sales managers purchased Atheros securities while exchanging a series of suspiciously-timed phone calls. As news leaked about the impending acquisition and the two companies subsequently announced it in a joint news release, Atheros’ stock price jumped 20 percent. Cohen, Herman, and Fleischli sold their securities to realize quick profits.
Here's what sucks, at least for these guys. The acquisition news ended up in the media later that same afternoon these three went and bought themselves some Atheros. Qualcomm issued its own press release making the official announcement the following day. Presumably, they could have still netted a profit getting in on that early enough but not so early that they clearly did so based on insider information.
Atheros jumped from $37.02 on January 3 (the day before the men purchased the securities) to $44.64 per share on January 5 (the day Qualcomm made the announcement).
Qualcomm's insider trading policy pretty clearly states that even trading on the news isn't kosher:
“Information is considered to be available to the public only when it has been released to the public through appropriate channels, e.g., by means of a press release, or a statement from one of the company’s senior officers, and enough time has elapsed to permit the investment market to absorb and evaluate the information.”
We aren't talking millions of dollars here, and in fact, Fleischli walked away with a mere $3,007 profit. Was it worth it, bro?
Qualcomm conducted an internal review and when questioned, the men said they read the news on DealBook, even though they were aware of the acquisition before its publication and purchased Atheros hours before the story appeared.
Keep it classy, insider traders.