The U.S. Securities and Exchange Commission (SEC) has charged a junior investment banker with insider trading, after he allegedly bought options in Electronics for Imaging Inc before it was acquired by private equity firm Siris Capital for $1.6 billion earlier this year.
According to a civil lawsuit filed by the SEC in Manhattan on Monday, Bill Tsai, a junior analyst at RBC Capital Markets, made a profit of approximately $98,750 from his actions. SEC officials said the 23-year-old analyst learned of the acquisition when Siris consulted RBC about providing advice and financing the deal.
“In April of this year, Bill Tsai made a quick profit by trading options in a publicly traded company he knew was about to be acquired,” Manhattan U.S. Attorney Geoffrey S. Berman said in a statement on Monday. “His profits were not the result of trading acumen, diligent research, or blind luck, but rather, as alleged, the product of theft of confidential information from his employer. For his alleged conduct, he now faces federal securities fraud charges.”
Regulators allege that Tsai bought EFII call options soon after learning about the transaction, which he sold for a profit of about $98,750 two hours after Siris announced the deal on April 15.
Shares of Electronics for Imaging soared 29.3% that day, and the SEC said Tsai netted a profit of $98,750 profit on his options, for which he had bought for $28,410. He allegedly used a personal trading account which he had concealed from RBC.
“Using our enhanced analysis and detection capabilities, the SEC was able to act swiftly, exposing Tsai’s misconduct just months after his illegal trading took place,” said Joseph Sansone, chief of the SEC enforcement division’s market abuse division.
Based in New York, Tsai graduated from NYU Stern School of Business last year and later joined RBC as an investment banking analyst, according to his LinkedIn page. The SEC has charged him with one count of securities fraud, which carries a maximum sentence of 20 years in jail.
RBC spokeswoman Sanam Heidary told Bloomberg that the bank has suspended Tsai. Regulators have not accused RBC of wrongdoing.
“RBC has a zero tolerance approach to any breach of the law or our code of conduct. We have cooperated fully with law enforcement as it relates to this matter,” Heidary said.
