SEC Charges Florida Resident With Insider Trading

On July 30th, 2024, the Securities and Exchange Commission (SEC) confirmed that a Florida resident has been charged with insider trading. In a complaint brought in the United States District Court for the Southern District of Florida, the SEC alleges that Charles Baugh—a man from Palm Beach County—knowingly violated anti-fraud provisions of the federal securities law. Here, our Miami securities fraud attorney discusses the allegations in more detail.

Securities Fraud Allegations: Insider Trading of ADT

 Charles Baugh is a resident of Southeast Florida who is facing civil securities fraud charges from the SEC. Mr. Bought was charged in connection to trades involving ADT, Inc. ADT is a residential and small business securities company. The business entered into a partnership with Google in 2020. Prior to the public announcement of that partnership, Mr. Baugh made a number of different trades.

According to the allegations raised by the SEC, Mr. Baugh used material, non-public information obtained from a family member who was employed by ADT to get ahead of its partnership announcement. He bought shares right before the announcement and sold them soon after. The SEC contends that he made nearly $400,000 in improper gains.

Notably, Mr. Baugh has already entered into a consent decree with the federal agency. Without admitting to or denying any misconduct, he has agreed to pay more than $320,000 in disgorgement and nearly $475,000 in civil fines. The settlement agreement between the SEC in the South Florida resident is still subject to court approval.

What is Insider Trading? 

Broadly described, insider trading involves the buying or selling of a publicly-traded company’s stock by someone who has non-public, material information about that stock. It is illegal when the information used is confidential  and gives that trader (the insider) an unfair advantage over other investors. Insider trading is closely monitored by federal regulatory bodies, including the SEC.

Why Insider Trading Harms Innocent Investors 

Investors rely on fair markets. When people unlawfully manipulate the market, it can cause serious harm to innocent investors. It can also undermine the system as a whole. Here are some of the most notable reasons why insider trading is bad for other investors:

• Erodes Trust: Insider trading suggests that not all market participants are operating on a level playing field. When insiders act on confidential information, it is a big problem.
• Distorts Prices: Insiders buying/selling stock based on non-public information can lead to artificial prices. Innocent investors are then forced to make decisions based on inaccuracies.
• Reduces Liquidity: The perception or reality of insider trading can deter investment by reducing confidence among regular investors.
• More Volatility: Markets thrive on stability and predictability. Insider trading introduces unpredictability as prices react sharply when insider transactions are revealed or suspected.

We Protect the Rights of Investors in Florida

At ​Carlson & Associates, P.A., we put investors first. Our firm represents investors in the full range of securities fraud cases—from unauthorized trading to unsuitable investment recommendations. If you have any questions about a claim against a broker, brokerage firm, or other party, we are here to help. Contact our investment fraud team today to set up a confidential initial consultation.

Source:

sec.gov/enforcement-litigation/litigation-releases/lr-26062