U.S. authorities have charged a junior investment banker for RBC Capital Markets in New York with insider trading in connection with a pending merger deal involving one of the bank’s clients.
Both the U.S. Securities and Exchange Commission (SEC) and the U.S. attorney for the Southern District of New York brought charges against Bill Tsai, a junior investment banker at RBC, alleging that he engaged in insider trading based on confidential information that he learned about private equity firm Siris Capital Group’s plans to acquire Electronics For Imaging, Inc (EFII).
RBC acted for Siris in the US$1.7 billion deal that was announced in April and closed in July.
In a complaint filed in federal court in Manhattan, the SEC alleged that Tsai, who joined the firm in July 2018, learned about the planned deal in March of this year, when Siris consulted with RBC about providing financing and advice on the proposed transaction.
The regulator said that he then purchased call options on EFII, which he subsequently sold for a profit of almost US$100,000 after the deal was announced in mid-April.
The SEC also alleged that Tsai attempted to hide his trading by using a brokerage account that he concealed from the bank, and by circumventing its requirements that employees pre-clear their securities trades.
“Using our enhanced analysis and detection capabilities, the SEC was able to act swiftly, exposing Tsai’s misconduct just months after his illegal trading took place,” Joseph Sansone, chief of the SEC enforcement division’s market abuse unit, said in a statement.
In its case, the regulator is seeking disgorgement of ill-gotten gains plus interest, penalties and injunctive relief.
In a parallel action, Tsai has also been charged with one count of securities fraud. He was arrested and charged yesterday, and is slated to appear in Manhattan federal court on Monday.
“In April of this year, Bill Tsai made a quick profit by trading options in a publicly traded company he knew was about to be acquired. His profits were not the result of trading acumen, diligent research, or blind luck, but rather, as alleged, the product of theft of confidential information from his employer. For his alleged conduct, he now faces federal securities fraud charges,” Manhattan U.S. attorney Geoffrey Berman said in a statement.
The allegations have not been proven in either case.
“RBC has a zero-tolerance approach to any breach of the law or our code of conduct,” said Sanam Heidary, global head of communications for RBC Capital Markets, in a statement. “We have cooperated fully with law enforcement as it relates to this matter.”
The firm also confirmed that Tsai has been suspended.