The Securities and Exchange Commission (SEC) of US has charged a former Deloitte Tax partner and his wife with repeatedly leaking confidential merger and acquisition information to family members overseas in a multi-million dollar insider trading scheme.
The SEC alleged that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte’s clients to Annabel’s sister and brother-in-law in London.
After receiving the illegal tips, the brother-in-law took financial positions in US companies that were targets of acquisitions by Arnold McClellan’s clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans.
Their insider trading have reaped illegal profits of approximately $3m, half of which was to be funneled back to Annabel McClellan, alleged SEC.
The UK Financial Services Authority (FSA) has announced charges against the two relatives, James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm.
According to the SEC’s complaint, Arnold McClellan had access to highly confidential information while serving as the head of one of Deloitte’s regional mergers and acquisitions teams. He provided tax and other advice to Deloitte’s clients that were considering corporate acquisitions.
The SEC alleged that between 2006 and 2008, James Sanders used the non-public information obtained from the McClellans to purchase derivative financial instruments known as ‘spread bets’ that are pegged to the price of the underlying US stock.
The trading started modestly, with James Sanders buying the equivalent of 1,000 shares of stock in a company that Arnold McClellan’s client was attempting to acquire. Subsequent deals netted significant trading profits, and eventually James Sanders was taking large positions and passing along information about Arnold McClellan’s deals to colleagues and clients at his trading firm as well as to his father.