The Securities and Exchange Commission has charged a former executive at Yahoo! Inc., along with a former mutual fund manager at an Ameriprise Financial subsidiary, with insider trading. Both acted on confidential information about a search-engine partnership between Yahoo! and Microsoft Corporation.
The SEC alleges Robert W. Kwok, Yahoo’s senior director of business management, breached his duty to the company in July 2009 when he told Reema D. Shah that a deal between Yahoo! and Microsoft would be announced soon.
Shah reached out to Kwok amid market rumors of an impending partnership between the two companies, and Kwok then told her only a few people knew of the coming announcement.
Based on Kwok’s tip, Shah prompted the mutual funds she managed to buy more than 700,000 shares of Yahoo! stock that were later sold for profits of approximately $389,000.
The SEC alleges that a year earlier, the roles were reversed. Shah tipped Kwok with material non-public information about an impending acquisition announcement between two other companies. Kwok traded in a personal account based on the confidential information and gained profits of $4,754.
Kwok and Shah have agreed to settle the charges. The court has yet to determine financial penalties and disgorgement, but Shah will be permanently barred from the securities industry and Kwok will be permanently barred from serving as an officer or director of a public company.