U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20367 / November 20, 2007
SEC v. Mitchel S. Guttenberg, Erik R. Franklin, David M. Tavdy, Mark E. Lenowitz, Robert D. Babcock, Andrew A. Srebnik, Ken Okada, David A. Glass, Marc R. Jurman, Randi E. Collotta, Christopher K. Collotta, Q Capital Investment Partners, LP, DSJ International Resources Ltd. (d/b/a Chelsey Capital), and Jasper Capital LLC, C.A. No. 07 CV 1774 (S.D.N.Y) (PKC)
Former Bear Stearns Registered Representative Andrew Srebnik Settles SEC Insider Trading Charges
The Securities and Exchange Commission announced today that on November 14, 2007, the Honorable P. Kevin Castel, United States District Judge for the Southern District of New York, entered a final judgment against Andrew A. Srebnik, a former registered representative at Bear, Stearns & Co., Inc., in SEC v. Guttenberg, et al., C.A. No. 07 CV 1774 (S.D.N.Y.), an insider trading case the Commission filed on March 1, 2007. See Lit. Rel. No. 20022. Srebnik is one of fourteen defendants in the Commission's complaint, which alleged illegal insider trading in connection with two related schemes in which Wall Street professionals serially traded on material, nonpublic information tipped, in exchange for cash kickbacks, by insiders at UBS Securities LLC and Morgan Stanley & Co., Inc.
With respect to Srebnik, the Commission's complaint alleged that from at least 2001 through 2006, Mitchel S. Guttenberg, an executive director in the equity research department of UBS, illegally tipped material, nonpublic information concerning upcoming UBS analyst upgrades and downgrades to at least two Wall Street traders, Erik R. Franklin and David M. Tavdy, in exchange for sharing in the illicit profits from their trading on that information. The complaint alleged that Franklin illegally traded on this insider information for a hedge fund he managed at Bear, Stearns & Co., Inc., Lyford Cay Capital, LP, and in his personal accounts at Bear Stearns. As alleged in the complaint, Andrew Srebnik worked on a trading desk at Bear Stearns where he had access to Franklin's trading information. The complaint alleged that based on Franklin's trading patterns and discussions with another registered representative at Bear Stearns knowledgeable of Franklin's trading, Srebnik knew that Franklin was using material, nonpublic information to trade ahead of upcoming UBS analyst recommendations. The complaint further alleged that from at least March 2002 through June 2002, Srebnik monitored Franklin's trading at Bear Stearns and used the UBS tips to purchase and sell securities in his personal account, in violation Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933.
Without admitting or denying the allegations in the complaint, Srebnik consented to the entry of the final judgment which (i) permanently enjoins him from violating Exchange Act Section 10(b), Rule 10b-5 thereunder, and Securities Act Section 17(a); and (ii) orders him to pay $54,730, which consists of disgorgement of $23,178, prejudgment interest thereon of $8,374, and a civil penalty of $23,178. In a related administrative proceeding, Srebnik consented to entry of a Commission order that bars him from association with any broker, dealer, or investment adviser.
The Commission's investigation is continuing.