The Securities and Exchange Commission today filed insider trading charges against Charles Rustin “Rusty” Holzer, a former broker who now manages a New York-based family investment office, and Fernando Moraes, the Chief Operating Officer of that family office. The SEC’s complaints allege that Holzer and Moraes traded in options of Dun & Bradstreet Corp. (NYSE: DNB) based on material nonpublic information ahead of the company’s August 8, 2018 announcement that it had agreed to be acquired by a private investor group at a price of $145 per share pursuant to an offer made approximately a month earlier. The SEC further alleges that Holzer and Moraes tipped two other traders who also traded ahead of the announcement.
According to the SEC’s complaints, about a week before the announcement, Holzer was approached by an investment adviser to discuss a pooled investment opportunity on a “no names” basis, pending execution of a non-disclosure agreement. The SEC alleges that, once the NDA was signed, the adviser sent Holzer and Moraes a 109-page investment presentation that described the proposed transaction, including identifying DNB as the acquisition target, $145 per share as the purchase price (a 15% premium to market), the anticipated date of the public announcement as on or before August 9, 2018, and other material nonpublic information.
According to the SEC’s complaints, the NDA required Holzer and all employees of his family office to keep confidential all information about DNB and the proposed transaction and to use it solely for the purpose of evaluating the pooled investment opportunity. Instead, the SEC alleges, Holzer and Moraes used the information to trade in DNB options ahead of the announcement, realizing ill-gotten profits of $96,091 and $8,842, respectively. The SEC also alleges that Holzer tipped his cousin who realized $672,000 in trading profits, and Moraes tipped a business associate who realized $65,332 in trading profits.
The SEC’s complaints, filed in the Southern District of New York, charge Holzer and Moraes with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Holzer, without admitting or denying the allegations in the SEC’s complaint against him, and subject to court approval, consented to the entry of a judgment permanently enjoining him from violating Section 10(b) and Rule 10b-5, permanently barring him from acting as an officer or director of a public issuer, and ordering him to pay disgorgement, plus prejudgment interest, and a civil penalty, in amounts to be determined by the court.
Moraes, without admitting or denying the allegations in the SEC’s complaint against him, and subject to court approval, consented to the entry of a final judgment permanently enjoining him from violating Section 10(b) and Rule 10b-5, ordering him to pay disgorgement of $8,842 plus prejudgment interest of $1,647 and a civil penalty of $48,646, and permanently barring him from acting as an officer or director of a public issuer.
The SEC’s investigation was conducted by Derek Schoenmann and Elizabeth Baier of the New York Regional Office with assistance from Richard Hong of the Trial Unit. The investigation was supervised by Celeste Chase and Thomas P. Smith, Jr. The litigation against Holzer will be handled by Messrs. Hong and Schoenmann.