Research Analyst Charged With Insider Trading On Major Buyout Deal

SEC has charged research analyst with insider trading and raking in $1.5 million on the Apollo Global Management/ADT deal.

The U.S. Securities and Exchange Commission (SEC) today charged a New-York based research analyst who allegedly made over $1.5 million in February through trades made via his mother’s brokerage account. His actions were based on non-public information that he obtained at work in relation to Apollo Global Management’s $7 billion deal to buy ADT Corporation.

According to SEC’s complaint, John Afriyie found out about the impending acquisition of ADT Corporation when prospective acquirer, Apollo Global Management, approached the investment firm where he was employed to discuss potential debt financing for a public-to-private deal.

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Afriyie subsequently proceeded to trade on confidential details relating to the deal which he accessed on the firm’s computer network. He then purchased thousands of high-risk, out-of-the-money ADT call options in his mother’s account in anticipation that ADT’s stock price would rise when the transaction was publicly announced. The ADT deal was announced on 16 February and Afriyie then sold all of the ADT call options in his mother’s account, reaping in more than $1.5 million in gains on the trade.

SEC’s complaint against Afriyie has also named his mother as a relief defendant for the purposes of recovering the illicit gains that Afriyie generated by trading in his mother’s name. The charges are the latest example of SEC staff thwarting the efforts of insider traders to avoid detection by trading in a relative’s brokerage account.

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Commenting on the offence, Jina L. Choi, Director of the SEC’s San Francisco Regional Office, said: “On behalf of the millions of traders in our markets who play by the rules, we will continue to detect and expose those who don’t.”

In parallel with today’s SEC’s action against Afriyie, a New York court has also announced criminal charges against him. Afriyie has reportedly been released on a $200,000 bond.



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