Husband of Law Firm Partner Settles SEC Insider Charges Over Pending Merger
A Houston man agreed Feb. 6 in the U.S. District Court for the Southern District of Texas to pay almost $60,000 to resolve Securities and Exchange Commission charges he bought stock based on inside information about Texas Instrument’s (TXN) pending acquisition of Santa Clara, Calif.-based National Semiconductor Corp. (SEC v. Balchan, S.D. Tex., No 4 13 cv 00298, 2/6/13).
In a release, the SEC said defendant James Balchan misappropriated the information from his wife, a partner at a law firm that was consulting on the deal. Balchan’s wife was not named in the complaint, and her law firm was not identified.
Social Event Canceled
Specifically, the SEC said in a release, Balchan bought NSC stock after being told by his wife that a social event they were attending had been canceled because of the imminent business combination. Balchan’s wife allegedly shared the information in confidence in the context of discussing their weekend plans.
Texas Instruments announced the acquisition on April 4, 2011; in the wake of the announcement, NSC’s stock price rose more than 75 percent. Balchan then sold his stock, realizing almost $30,000 in allegedly unlawful profits.
“Spouses or other members of an attorney’s family may learn highly confidential information about a company when having a casual conversation,” Marc Fagel, director of the SEC’s San Francisco Regional Office, said in the release. “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.”
In settling the allegations, Balchan, who appeared pro so, agreed to pay disgorgement and prejudgment interest of $30,615.18, and a $29,052.39 civil penalty.