SEC Charges Wells Fargo Banker, 9 Others with Insider Trading

Wednesday, 05 Dec 2012 06:03 PM

 

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Securities regulators on Wednesday charged a Wells Fargo investment banker and nine others for their alleged role in an insider-trading ring that earned more than $11 million by trading on tips about impending mergers.

The Securities and Exchange Commission said that John Femenia, 30, misused his position at a unit of Wells Fargo to obtain material, non-public information about four different mergers involving firm clients.

The SEC said Femenia then tipped his friend, Shawn Hegedus, a registered broker-dealer. The SEC says the two then tipped other friends, resulting in a "massive, serial insider-trading ring" that spread across five states.

The SEC said it has already obtained a court order to freeze the assets of the defendants involved.

"Here you have an investment banker who clearly knew better that inside information can't form the basis of trading decisions," said William Hicks, Associate Director for Enforcement in the SEC's Atlanta Regional Office.

"Instead he basically started a phone tree of nonpublic information to enrich friends and others."

According to the SEC's complaint, filed in the U.S. District Court for Western District of North Carolina, Femenia is still employed in the Wells Fargo New York office with the Industrials Investment Banking Group. Previously, he worked in the North Carolina office.

A spokeswoman for Wells Fargo had no immediate comment.

Hegedus, 31, was previously employed by brokerages John Thomas Financial, and more recently, Gradient Securities LLC, until April 2012.

Attempts to reach Femenia and Hegedus were unsuccessful, and the SEC said there is no known defense counsel at this time.

The other various defendants charged include friends of Femenia and Hegedus who live in a variety of states, from California and Florida to South Carolina.

The SEC additionally charged two companies with ties to Hegedus and his girlfriend.

The SEC said Femenia was able to profit from stock and options trades in companies that were being acquired, and that "at least one trader provided a portion of his profits to Femenia in exchange for the information," according to an SEC press release.

© 2014 Thomson/Reuters. All rights reserved.

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