July 10, 2018/US SEC
The Securities and Exchange Commission today charged the former CEO of a New Jersey-based payment processing company and his romantic partner, in an insider trading scheme that leveraged nonpublic information about an impending merger announcement to generate more than $250,000 of illicit profits for the defendants.
According to the SEC’s complaint, Robert O. Carr provided his longtime girlfriend, Katherine M. Hanratty, with confidential information about a potential acquisition of Heartland Payment Systems, Inc. by another payment processing company. In the weeks leading up to the merger announcement, Carr allegedly gave Hanratty $1 million to open a brokerage account and instructed her to use almost all of the funds to purchase Heartland stock. The SEC alleges that Hanratty followed Carr’s instructions, opening the account and purchasing more than 11,000 shares of Heartland stock. After the merger was announced, Heartland’s stock price rose substantially, and Hanratty allegedly sought Carr’s advice about when to sell the stock. Hanratty ultimately liquidated her entire position in a single day, earning substantial profits on the sale.
The SEC’s complaint, filed in federal district court in Connecticut, charges Carr and Hanratty with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks disgorgement of ill-gotten gains plus prejudgment interest, penalties, and injunctive relief. The SEC’s complaint further seeks to bar Carr from serving as officers or directors of any SEC-reporting company.
The SEC’s case is being handled by Xinyue Angela Lin, Deena Bernstein, and Paul G. Block of the Boston Regional Office. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority (ORSA), and the Financial Industry Regulatory Authority (FINRA).