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S.E.C. v. John Kinnucan

S.E.C. v. John Kinnucan

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Published by DealBook

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Categories:Business/Law
Published by: DealBook on Feb 17, 2012
Copyright:Attribution Non-commercial

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02/17/2012

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GeorgeS.CanellosAttorneyforPlaintiffSECURITIESANDEXCHANGECOMMISSIONNewYorkRegionalOffice
3
WorldFinancialCenter,Suite400NewYork,NY10281-1022(212)336-1020UNITEDSTATESDISTRICTCOURTSOUTHERNDISTRICTOFNEWYORKSECURITIESANDEXCHANGECOMMISSION,Plaintiff,
-against-
COMPLAINTJOHNKINNUCANandBROADBANDRESEARCHCORPORATION,ECFCASEDefendants.
PlaintiffSecuritiesandExchangeCommission("Commission"),foritsComplaintagainstdefendantsJohnKinnucan("Kinnucan")andBroadbandResearchCorporation("Broadband"),allegesasfollows:
SUMMARY
1.ThiscaseinvolvesinsidertradingbyKinnucanandhisconsultingfirmBroadband,whichwaspurportedlyinthebusinessofprovidingtoitsclientslegitimateresearchaboutpubliclytradedtechnologycompanies,butwhichoftenprovidednonpublicinformationthatKinnucanobtainedfromsourcesinsidethesecompanies.
 
2.Fromatleast2009through2010,Kinnucanobtainedmaterialnonpublicinformationfromwell-placedemployeesatavarietyofpublictechnologycompanies,includingF5Networks,Inc.("F5").Kinnucancompensatedhissourcesinavarietyofways.Kinnucanpaidatleastoneofhissourcescash,andprovidedothersourceswithmeals,skitripsandothervacations.Kinnucanalsobefriendedhissourcesasameanstoencouragethemtoprovidehimwithmaterialnonpublicinformation.3.KinnucanpeddledthematerialnonpublicinformationheobtainedfromhissourcestoBroadband'sclients:portfoliomanagersandanalystsatprominenthedgefundsandothernationallyrecognizedinvestmentadvisers.Kinnucanprovidedhisclientswithoralandemailupdatesofthematerialnonpublicinformationheobtainedfromhissources.Forthis"service,"Kinnucanchargedhisclientstensofthousandsofdollarsperyear,andgeneratedhundredsofthousandsofdollarsinannualrevenuesforBroadbandduring2009and2010.4.Broadband'sinvestmentadviserclientstradedbasedonthematerialnonpublicinformationthatKinnucanprovidedandgeneratedsizableprofitsfortheaccountsthattheymanaged.InJuly2010,KinnucanobtainedmaterialnonpublicinformationfromasourcewhoworkedatF5(the"F5Source")regardingF5'supcomingquarterlyearningsannouncement.Kinnucanprovidedthisinformationtoseveralofhisclients.AtleastthreeofthoseclientstradedonthebasisofKinnucan'sinsideinformationandmadeprofitsoravoidedlossesofapproximately$1.58million.2
 
NATUREOFTHEPROCEEDINGSANDRELIEFSOUGHT
5.TheCommissionbringsthisactionpursuanttotheauthorityconferreduponitbySection21(d)oftheSecuritiesExchangeActof1934("ExchangeAct")[15U.S.C.§78u(d)].TheCommissionseekspermanentinjunctionsagainstKinnucanandBroadband,enjoiningthemfromengaginginthetransactions,acts,practices,andcoursesofbusinessallegedinthisComplaint,anddisgorgementofill-gottengainsorlossesavoidedfromtheunlawfulinsidertradingactivitysetforthinthisComplaint,togetherwithprejudgmentinterest.TheCommissionalsoseekscivilpenaltiespursuanttoSection21AoftheExchangeAct[15U.S.C.§78u-l].TheCommissionseeksanyotherrelieftheCourtmaydeemappropriatepursuanttoSection21(d)(5)oftheExchangeAct[15U.S.C.§78u(d)(5)].
JURISDICTIONANDVENUE
6.ThisCourthasjurisdictionoverthisactionpursuanttoSections21(d),21(e),and27oftheExchangeAct[15U.S.C.§§78u(d),78u(e),and78aa].7.VenueliesinthisCourtpursuanttoSections21(d),21A,and27oftheExchangeAct[15U.S.C.§§78u(d),78u-l,and78aa].Certainoftheacts,practices,transactions,andcoursesofbusinessallegedinthisComplaintoccurredwithintheSouthernDistrictofNewYork.Duringtherelevanttimeperiod,certainclientsofKinnucanandBroadbandhadofficesinNewYork,NewYork,andKinnucanregularlyplacedtelephonecallstoNewYork,NewYorktoconductbusiness.CertaincommunicationsdescribedinthisComplainttookplacewhileatleastoneofthepartiestothecommunicationwasphysicallylocatedinNewYork,NewYork.Moreover,certainofthetradesdescribedinthisComplaintwereexecutedthroughbrokeragefirmslocated.3

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