EY US auditor settles $87k SEC insider trading charges
A former junior auditor with EY’s US firm based in Silicon Valley has paid over $87,000 (£70,000) to the Securities and Exchange Commission (SEC) to settle charges that he traded on inside information about a client on the verge of a merger, and has agreed to a five-year suspension as an accountant
16 Mar 2017
The SEC said that Nima Hedayati learned from his work that California-based Lam Research Corporation was making preparations to acquire another Californian firm, KLA-Tencor Corporation. The two companies manufacture equipment used in the creation of semiconductors.
According to the SEC, Hedayati proceeded to purchase out-of-the money call options in KLA common stock in his brokerage account as well as his fiancée’s brokerage account, and he also encouraged his mother to purchase KLA common stock.
After merger plans were publicly announced, KLA’s stock price increased nearly 20%, and Hedayati and his mother collectively profited by more than $43,000 from the illegal trades. EY terminated Hedayati’s employment when it discovered his misconduct.
Jina Choi, director of the SEC’s San Francisco regional office, said: ‘Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s non-public information in a quest for an easy profit, and it wound up costing him a lot more in the end.’
Without admitting or denying the SEC’s findings, Hedayati agreed to pay disgorgement of $43,027plus $1,269 in interest and a $43,027 penalty for a total of more than $87,000. He also agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits him to apply for reinstatement after five years.
An EY spokesperson said in a statement: ‘EY has zero tolerance for misuse of confidential client information. Hedayati was immediately fired by EY upon our learning of this gross misconduct. EY brought the matter to the attention of the SEC and fully cooperated in its investigation.’