SEC brings insider trading charges against securities pro and former corporate insider
The Securities and Exchange Commission (SEC) has filed a settled action against registered representative and investment adviser representative John P. Mendes and former corporate insider Andre Dabbaghian, charging them with insider trading in the securities of Layne Christensen Company before the February 14, 2018 public announcement that Granite Construction Inc. had agreed to acquire Layne for $565 million.
According to the SEC’s complaint, filed in federal district court in Oakland, California, Mendes obtained material nonpublic information about the acquisition from his close friend Dabbaghian, who was employed at Granite and helped negotiate the acquisition of Layne.
The Complaint alleges that from November 3, 2017 through February 13, 2018, Mendes used the information that Dabbaghian recklessly provided to purchase Layne securities for Mendes’s wife, parents, and at least 17 other brokerage customers and advisory clients. As a result of Mendes’s allegedly unlawful trades, his wife, parents, and customers and clients made profits of approximately $33,200, $9,200, and $127,400, respectively.
The SEC’s complaint charges Mendes and Dabbaghian with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, seeks injunctive relief, officer and director bars, and civil penalties from both defendants, and seeks disgorgement with prejudgment interest from Mendes.
Mendes has agreed to the entry of a judgment permanently enjoining him from violating the charged provisions, ordering him to pay disgorgement of $41,985 with prejudgment interest and a civil penalty of $51,579, and to be barred from acting as an officer or director of a public issuer for a period of five years.
Dabbaghian, without admitting or denying the allegations in the SEC’s complaint, has agreed to the entry of a judgment that would permanently enjoin him from violating the charged provisions and to be barred from acting as an officer or director of a public issuer for a period of three years. At a later date, the court will determine the amount of a civil penalty, if any, to be imposed against Dabbaghian.
Both settlements are subject to court approval.