New York financial adviser Tibor Klein and a friend, a Florida broker, earned more than $437,000 in illegal profits for themselves and clients by trading shares of King Pharmaceuticals after they were tipped that the drug firm would be purchased by giant Pfizer Inc., securities regulators said Friday.
The Securities and Exchange Commission alleged that Mr. Klein, president of Klein Financial Services, began purchasing King Pharmaceuticals shares on the first trading day after he learned about the merger from a client who does legal work for the company.
After the merger was announced Oct. 12, 2010, the stock's price rose 39% and Mr. Klein sold shares in his and in clients' accounts to generate profits of $328,375, the SEC said in its complaint.
Mr. Klein also tipped his best friend Michael Shechtman, a stockbroker who lives in Florida, after learning about the deal, the SEC said. Mr. Shechtman then purchased shares and options in his and his wife's accounts, the commission said.
Mr. Shechtman sold those shares and options after the deal was announced and shares rose, earning him about $109,040 in illegal profits, according to the complaint filed in the U.S. District Court for the Southern District of Florida.
“As securities industry professionals, Klein and Shechtman clearly know the difference between legal and illegal trading,” said Eric I. Bustillo, director of the SEC regional office in Miami. “Instead of playing by the rules, they chose to exploit nonpublic information for an easy payday, but they didn't plan on getting caught by the SEC.”
Neither Mr. Klein's lawyer, Tucker Byrd, nor Mr. Shechtman's lawyer, Jim Sallah, returned calls seeking comment.
The SEC said there were many more calls than normal between the two friends over the days involved. The complaint also said that Mr. Shechtman had never traded in options before the trades noted in this case.