San Francisco, CA, Feb. 6, 2013 – The Securities and Exchange Commission today charged a Houston man with insider trading ahead of the acquisition of Santa Clara-based National Semiconductor Corporation based on confidential details that he gleaned from his wife, a partner at a large law firm that was consulted on the deal.
The SEC alleges that James Balchan immediately bought shares of National Semiconductor stock after his wife informed him that a social event for the company’s general counsel had been cancelled because he was busy working on an imminent merger. Balchan and his wife were among the invitees to the event. Balchan made nearly $30,000 in illicit profits when he sold his shares after Texas Instruments publicly announced its acquisition of National Semiconductor and the stock price jumped more than 75 percent.
Balchan agreed to pay nearly $60,000 to settle the SEC’s charges.
“Spouses or other members of an attorney’s family may learn highly confidential information about a company when having a casual conversation,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “Using that confidential information to buy or sell stock as Balchan did is not only a breach of trust, but also a violation of the federal securities laws.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Texas, another partner at the firm where Balchan’s wife worked began organizing informal client “wine and dine” events for the first weekend of April 2011 in honor of National Semiconductor’s general counsel. The partner was close to Balchan’s wife and socially acquainted with Balchan. The partner invited both of them to the weekend events and told them that National Semiconductor’s general counsel would be in attendance.
According to the SEC’s complaint, the partner called National Semiconductor’s general counsel a few days before the weekend and was informed that he was working on the company’s impending acquisition. The general counsel sought the law firm’s advice in dealing with certain regulatory issues arising from the deal. He also informed the partner that, in light of the acquisition, he would be unable to attend the event that coming weekend. When the law partner advised Balchan’s wife that National Semiconductor’s general counsel cancelled the client weekend because of the imminent acquisition, she shared the information with Balchan in confidence later that night in the context of discussing their weekend plans.
The SEC alleges that the very next morning, Balchan misappropriated the confidential information he learned about the acquisition and purchased 2,000 National Semiconductor shares. A few days later, Balchan purchased 1,000 shares. Texas Instruments issued a press release on April 4 announcing its acquisition of National Semiconductor. Each of Balchan’s National Semiconductor trades was based on inside information in violation of duties of trust and confidence that he owed to his wife. Balchan was aware that his wife owed a duty of trust or confidence to her law firm and its clients.
Balchan has settled the SEC’s charges without admitting or denying the allegations. He agreed to pay disgorgement and prejudgment interest of $30,615.18, and an additional penalty equal to his profits of $29,052.39.
The SEC’s investigation was conducted by Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.For more information about this enforcement action, contact:
Michael S. Dicke
Associate Director (Enforcement), SEC’s San Francisco Regional Office
(415) 705-2458
Jina L. Choi
Assistant Director (Enforcement), SEC’s San Francisco Regional Office
(415) 705-2372
Posted by Denise Rousset
on February 6, 2013. Filed under Business.
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