On Monday, June 22, 2009, a federal jury in Boston returned a verdict against Steven E. Nothern on the SEC’s charges that Nothern engaged in insider trading. Nothern is a former Senior Vice President and manager of seven fixed income mutual funds for Massachusetts Financial Services Company (“MFS”).
The SEC alleged that for years, Peter J. Davis, Jr., a Washington, D.C. based consultant, attended the Treasury Department’s quarterly refunding press conferences under an explicit agreement that he would honor the news embargo that Treasury imposed until the designated public announcement time. At these press conferences, the Treasury Department announced the Federal Government’s financing requirements for the coming quarter. Following the October 31, 2001, refunding press conference, Davis allegedly placed a series of cell phone calls to his clients, including Nothern, and told Nothern that the Treasury Department was suspending future long bond issuances.
According to the complaint, before the news became public, Nothern and other MFS portfolio managers that he tipped bought $65 million in par value of 30-year bonds for funds that they managed, generating approximately $3.1 million in illegal profits.
After deliberating for three hours, the jury returned a verdict finding that Nothern violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
