The U.S. government watchdog panel said in a release Sigma Capital engaged in insider trading based on non-public information obtained from one of its analysts about quarterly earnings of Dell and Nvidia Corp.
The SEC's case arose from its investigation into expert networks and the trading activities of hedge funds, which resulted in charges being filed last year against several hedge fund managers and analysts, including Jon Horvath, a former analyst at Sigma Capital who admitted liability when he settled with the SEC this month.
Sigma Capital agreed to give up $6.43 million in illegally gained profits plus prejudgment interest of $1.09 million, along with a penalty of $6.43 million.
The SEC's complaint alleged Horvath provided Sigma Capital portfolio managers with non-public details about quarterly earnings at the two companies after he learned of them through a group of hedge fund analysts with whom he regularly communicated. Based on that information, Sigma Capital traded Dell and Nvidia securities in advance of earnings announcements in 2008 and 2009 for $6.425 million in gains for its hedge fund affiliates.
"Quarterly revenues and profit margins are fundamental drivers of stock prices. By illegally obtaining these vital financial measures in advance of their public announcement, Sigma Capital secured a crystal ball revealing where the stock would likely be trading in the near future," said George S. Canellos, acting director of the SEC's enforcement division.