SEC: Financial Advisers Traded on Info Gleaned From AA Meeting
The pair allegedly learned about an upcoming insurance company merger during an Alcoholics Anonymous meeting, where shares rose 64 percent.
A pair of Ameriprise Financial Inc. investment advisers and three of their friends and family members allegedly earned more than $1.8 million in illicit profits through trades based on inside information that an insurance company was planning to merge with a Japanese firm.
Adviser Timothy McGee learned of the deal through a personal relationship he had formed through Alcoholics Anonymous with an executive of Philadelphia Consolidated Holding Corp., the Securities and Exchange Commission said. The insurance company exec allegedly confided in McGee about pressures at work during the negotiations and McGee promised to keep the information confidential.
In addition to buying shares in the insurance company himself, McGee tipped off adviser Michael Zirinsky, with whom he shared office space at the time, the SEC said in its complaint filed in U.S. District Court for the Eastern District of Pennsylvania in Philadelphia.
Zirinsky allegedly bought shares for his own account and those of his wife, sister, mother and grandmother. He also alerted his father and a friend living in Hong Kong, both of whom also bought shares in advance of the merger announcement, the SEC said.
Shares of Philadelphia Consolidated Holding Corp. rose 64 percent when the company’s merger with Tokio Marine Holdings was announced on July 23, 2008.
“McGee stole information shared with him in the utmost confidence, and as securities industry professionals, he and Zirinsky clearly knew better,” said Elaine Greenberg, associate director of the SEC’s regional office in Philadelphia. “As this case demonstrates, we will follow each link in a tipping chain all the way to Hong Kong if necessary.”
Mr. Zirinsky’s and a woman living in Hong Kong, who was tipped by the friend, agreed to pay $1.3 million to settle the SEC allegations against them. They settled without admitting or denying the charges.
The two advisers, both of whom live near Philadelphia, have practiced together since 2009 through the firm Frazer, McGee, Wayman, Zirinsky & Associates in Plymouth Meeting, Pennsylvania, according to the SEC. The firm says it is an advisory practice of Ameriprise Financial Services Inc.
An Ameriprise spokesman said today that both the advisers have now been suspended.
“We fully cooperated with the SEC on this matter and conducted an internal review,” said Paul Johnson, spokesman for Minneapolis-based Ameriprise, which has about 10,000 financial advisers. “We have strict rules related to the use of material, non-public information.”
Calls to McGee’s attorney, John Grugan at Ballard Spahr LLP, and Zirinsky’s lawyer, Richard Levan of Wiggin and Dana LLP, were not immediately returned.