It's All in the Family - SEC charges former Citigroup Banker with Securities Fraud

Well, well, the SEC actually starts a case. Been so long one forgets they have this authority.

Federal prosecutors charged former Citigroup banker Maher Kara with securities fraud for tipping his brother about upcoming mergers, in an insider trading scheme that reaped more than $6 million in illegal profits.

Federal regulators also filed civil charges Thursday against the brothers and six other friends and relatives for allegedly participating in the scheme which spanned from New York to California and the Midwest for three years or more.

The Securities and Exchange Commission said that Maher Kara, a former director in Citigroup Global Markets' investment banking division in New York, repeatedly told his brother Michael about upcoming healthcare industry deals from at least April 2004 through April 2007.

Michael Kara bought stock and options in companies that were the subject of Citigroup deals and passed tips to his friends and family members, who also traded the securities illegally, the SEC alleged.

According to the complaint, the network of friends and relatives profited the most from illegally trading in securities of Biosite Inc, a California-based medical testing company; and Andrx Corp, a Florida-based pharmaceutical company specializing in generic drugs.

Here is the actual complaint.

Ritholtz pointed out SEC prosecutions down 87% from 2000 in December 2008. Now we have one. Some little family insider trading scheme, in the millions. Now those Madoff $50 billion schemes...so far it seems one can't get any action on much unless someone walks in and confesses on video.

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There is an alternate theory on insider trading

The SEC is going on the first theory- that insiders shouldn't be allowed to profit from insider information.

The second theory that is more recent, is that with computers and websites, there should be no insider information to begin with, that it should be available to everybody.

I wonder which way the next round of regulation will end up going?

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