Appeals Court Exhumes SEC Insider-Trading Case Against Obus

Sep 7 2012 | 11:20am ET

The Securities and Exchange Commission's insider-trading case against Wynnefield Capital founder Nelson Obus and two others will move forward, after all.

The regulator won its appeal of a two-year-old lower court decision dismissing its lawsuit against Obus, Wynnefield analyst Peter Black and Black's friend Thomas Strickland. The SEC accuses Strickland, who worked at GE Capital, of tipping Black off to Allied Capital Corp.'s planned acquisition of SunSource in 2001. Black then allegedly told Obus, who bought up a 6% stake in SunSource, turning a $1.34 million profit for his three hedge funds.

The lower court had cited a GE Capital investigation which found that Strickland had not violated a duty to his employer. But the Second Circuit Court of Appeals in Manhattan said that was not enough evidence to exonerate Obus, Black and Strickland without trial.

"The GE investigation was motivated by corporate interests that may or may not coincide with the public interest in unearthing wrongdoing and affording a remedy," U.S. Circuit Judge John Walker Jr. wrote.

"The SEC established genuine issues of material fact with respect to its claims of insider trading," Walker wrote. A "rational jury could reasonably infer from the SEC's evidence that Strickland did tell Black that SunSource was about to be acquired."

Obus' lawyer, Joel Cohen, said his client was "disappointed" by the ruling, adding, "For over 10 years, Mr. Obus and Wynnefield Capital have refused to settle this lawsuit as a matter of principle. The facts remain the same: The lawsuit is baseless."


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.