Lauren CasperThe SEC on Wednesday charged Frank T. Poerio, Jr., a resident of Gibsonia, Pa., with insider trading in the securities of Dick’s Sporting Goods Inc. The SEC alleges that Mr. Poerio used nonpublic information obtained from a Dick’s employee to profit more than $800,000.
According to the complaint, between November 2019 and May 2021, Mr. Poerio repeatedly asked the employee, who had access to the company’s internal financial data, for updates on Dick’s performance. The employee allegedly responded with statements indicating that the company was “doing very well,” while requesting that Mr. Poerio refrain from trading in Dick’s securities.
The SEC alleges that Mr. Poerio understood these statements were based on the employee’s access to nonpublic information, including previews of upcoming quarterly revenue figures. Despite the employee’s requests, Mr. Poerio traded in Dick’s securities, breaching his duty of trust and confidence to the employee.
“We allege that Poerio exploited the trust of someone close to him by pumping that person for information and then ignoring his repeated requests not to trade on that information,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.
Insider trading continues to be a significant problem in the U.S. financial markets. According to a study by the New York University Stern School of Business, insider trading cases have increased by 30% over the past decade, with the SEC bringing an average of 50 cases per year. The study also found that insider trading often involves individuals who have close personal or professional relationships with company insiders, as alleged in the case against Mr. Poerio.
The consequences of insider trading can be severe. In addition to civil charges and lawsuits brought by the SEC, individuals may face criminal prosecution, hefty fines, and imprisonment. In a notable case from 2020, a former Amazon employee and her family members were charged with insider trading, resulting in illicit profits of approximately $1.4 million. The employee, who worked in Amazon’s finance department, allegedly tipped off her husband and father-in-law about the company’s financial results before they were publicly announced.
The complaint against Mr. Poerio, filed in the U.S. District Court for the Western District of Pennsylvania, charges him with violating antifraud provisions of the federal securities laws. Without denying the allegations, Mr. Poerio agreed to a settlement that permanently enjoins him from further violations and orders him to pay disgorgement, prejudgment interest, and a civil penalty, with the amounts to be determined by the court.
In a related action, the U.S. Attorney’s Office for the Western District of Pennsylvania announced criminal charges against Mr. Poerio.
The case highlights the SEC’s ongoing efforts to detect and prosecute insider trading, particularly when it involves the misuse of confidential information obtained through personal relationships. It also underscores the importance of maintaining the integrity of financial markets and the trust of investors.
As the SEC continues to crack down on insider trading, it is crucial for traders to understand the legal and ethical implications of using nonpublic information for personal gain. Companies should also maintain robust policies and training programs to prevent the misuse of confidential information by employees and their associates.
