January 6, 1989
TO: INVESTMENT ADVISER MEMBERS NO. 3-89
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 3-89
RE: ADVISER CHARGED WITH INSIDER TRADING; INSTITUTE HOLDS
SEMINAR ON INSIDER TRADING
__________________________________________________________
On December 28, 1988, the SEC brought charges against an
adviser for engaging in an insider trading scheme that netted
profits totalling $333,000. The SEC alleged that the investment
adviser misappropriated material non-public information
concerning a tender offer by Broken Hill Proprietary Company
(BHP) for Energy Reserves Group, Inc. (ERG) from his partner, a
consultant to ERG, who was intimately involved in the tender
offer negotiations. A copy of the SEC litigation release is
attached.
The SEC alleged that the adviser and a broker to whom the
adviser owed a long-standing debt, arranged to have other
investors acquire common stock in ERG before the BHP announced
its tender offer. The agency alleged that the adviser, broker
and other investors violated the anti-fraud sections of the
securities laws by knowingly trading on "material non-public
information." The SEC asked the court to enjoin the defendants
from future violations and order them to disgorge their trading
profits and to pay civil penalties under the Insider Trading
Sanctions Act of 1984.
INSTITUTE SEMINAR
As we have previously informed you, the Insider Trading and
Securities Fraud Enforcement Act of 1988, enacted in November,
1988, requires all investment advisers to establish, maintain and
enforce procedures designed to prevent insider trading. The
Institute will be holding a special one-day seminar to assist
members and outside counsel in developing procedures. The
seminar will be held on February 8, 1989 at the Capital Hilton,
1001 16th Street, NW, Washington, DC. Registration will take
place from 8:00 a.m. to 8:30 a.m. The seminar is expected to
last until 3:30 p.m.; lunch will be served. The fee for members
is $100; the fee for non-members is $200.00. Registration will
be open until the seminar is fully subscribed. If you should
need a room reservation, please call the Capital Hilton directly
at (202) 393-1000.
Topics expected to be discussed include background of the
Insider Trading and Securities Fraud Enforcement Act of 1988,
what constitutes insider trading, liability issues, procedures
for advisers whose only activities are advising investment
companies or private clients, and procedures for advisers
affiliated with multi-service firms.
A copy of the registration form is attached for your
convenience. Please return it as soon as possible to Lauren
Graham, Investment Company Institute, 1600 M Street, NW,
Washington, DC 20036.
We look forward to seeing you at the seminar.
Robert L. Bunnen, Jr.
Assistant General Counsel
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