A Toronto man has been charged with insider trading by U.S. regulators, who charge that he took a short position in Herbalife Ltd. (NYSE:HLF) ahead of an announcement by prominent hedge fund manager Bill Ackman that his firm had a negative view on the company.
The U.S. Securities and Exchange Commission (SEC) announced charges Tuesday against Filip Szymik of New York City and Jordan Peixoto of Toronto, alleging that they engaged in insider trading in Herbalife securities in advance of Ackman’s announcement of the views of his hedge fund, Pershing Square Management, LP, in December 2012.
The SEC alleges that Szymik’s roommate, who was an analyst at Pershing, told Szymik that the firm planned to publicly announce its negative view of Herbalife. The U.S. securities watchdog says that Szymik then tipped Peixoto, who purchased Herbalife put options the day before the announcement. As a result, the SEC says that Peixoto reaped US$47,100 in illicit profits.
According to the SEC’s order, Szymik and the unnamed analyst grew up together in Poland, and shared an apartment in New York. Peixoto, 30, worked as a research analyst at Deloitte in New York at the time. In 2012, Szymik and Peixoto were close friends who lived within a block of each other in New York and socialized together “nearly every weekend,” it says.
Szymik settled the case against him. In its order, the SEC found that he violated federal securities laws and SEC rules, and it ordered him to cease and desist and pay a US$47,100 civil penalty.
The allegations against Peixoto have not been proven. The SEC has instituted cease-and-desist proceedings against him to determine whether he violated securities laws and rules, and, if so, to determine what relief is appropriate.
“Szymik and Peixoto chose to engage in illicit tipping and trading in advance of the announcement of market-moving information and today they are being held accountable for those offenses,” said Sanjay Wadhwa, senior associate director of the SEC’s New York office.