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Investment Banker Used Wife’s Brokerage Account for Insider Trading Scheme

An investment banker agreed to pay over $360,000 (including disgorgement, a fine equal to his ill-gotten gains, and interest) for using his wife’s brokerage account to engage in insider trading.  As part of his settlement, the SEC dropped the charges against his wife, which it named as a relief defendant.  The SEC alleges that the defendant made trades through his wife’s brokerage account based on material non-public information learned while advising on acquisitions of two Chinese companies.  Although the alleged wrongdoing occurred outside the United States, the defendant was a United States citizen with a residence in California. 

This is why the definition of beneficial ownership for Code of Ethics reporting includes members of the immediate family sharing the same household.  Also, we question the wisdom of implicating your unknowing spouse in an insider trading scheme.