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By Matthew Quinn
In what was surely an easier insider trading case than the one it's mounting against Galleon Group founder Raj Rajaratnam, the Securities and Exchange Commission on Tuesday announced that a former Perot family companies employee charged with insider trading in September has agreed to return all of his illicit profits -- a total of more than $8.6 million.
Just two days after Dell announced plans to acquire Perot Systems, the SEC charged Reza Saleh of Richardson, Texas, with insider trading, alleging that he illegally traded in Perot Systems call options after learning about the merger before it was announced.
According to the SEC's complaint, Saleh purchased 9,332 Perot Systems call option contracts through two brokerage accounts in the weeks just prior to the deal's announcement. The call option contracts were set to expire in October 2009 and January 2010. Saleh sold all of the call options following the announcement of the $4 billion deal on Sept. 21.
That day, Perot Systems' stock price shot up approximately 65 percent.
The SEC said that on the morning of Sept. 21 its staff tagged Saleh as a suspicious trader. Additionally, soon after being contacted by SEC staff, Saleh even acknowledged to a Perot Systems director that he knew about the impending transaction when he traded.
Despite the case's apparent open-and-shut nature, the SEC opted to settle with Saleh. Without admitting or denying the allegations in the SEC's complaint, Saleh agreed to be permanently enjoined from violations of the anti-fraud provisions of the Securities Exchange Act of 1934. Saleh further agreed to an SEC administrative order barring him from future association with any investment adviser.
Under the terms of the settlement, the SEC plans to ask the court to appoint a third party to recommend a distribution plan for Saleh's illegal profits. The SEC also will ask the court to impose a financial penalty against Saleh. The settlement is subject to court approval.
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