On October 9, 2003, the U.S. Securities and Exchange Commission (SEC) filed an insider trading case, in the United States District Court for the Northern District of Texas, against a Dallas stock broker, the stock broker's brother, a former employee of Univision Communications Corporation (Univision), and a director of Hispanic Broadcasting Corporation (Hispanic Broadcasting). The SEC charged each of those individuals with engaging in insider trading in the stock of Hispanic Broadcasting, ahead of the June 12, 2002 announcement that Univision would acquire Hispanic Broadcasting in an all-stock transaction. The defendants have agreed, without admitting or denying the SEC's allegations, to pay, in the aggregate, over $450,000 to settle the SEC's claims against them.
In its complaint, the SEC alleges that, in May and June of 2002, Stephen White, after learning about the acquisition from a potential client - a large Hispanic Broadcasting shareholder - recommended Hispanic Broadcasting shares to a personal friend and a brokerage customer, both of whom then purchased the stock ahead of the announcement. By his conduct, the defendant violated a duty of trust and confidence: Stephen White violated duties of trust and confidence that he owed to the parties from whom he learned of the acquisition. Following the public announcement of the acquisition on June 12, 2002, the price of Hispanic Broadcasting's stock increased, and the two individuals, who purchased the stock based on Stephen White's recommendations, earned trading profits.
Without admitting or denying the allegations in the complaint, each of the individual defendants has made, and the SEC has accepted, an offer of settlement in which each defendant consents: to the entry of a permanent injunction enjoining them from further violations of the below-listed provisions of the federal securities laws; to disgorgement of trading profits, plus prejudgment interest; and to payment of a civil money penalty. Specifically, Stephen White will disgorge $195,333 in profits that were earned by the individuals who purchased Hispanic Broadcasting shares based on his recommendations, plus prejudgment interest of $11,825, and pay a civil money penalty of $195,333. Stephen White will also consent to the institution of public administrative proceedings against him by the SEC, and entry of an order by the SEC, barring him from association with a broker-dealer or investment adviser, with a right to reapply for association after four years.
The SEC's complaint alleges that the individual defendants violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.
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