SEC Charges Two People With Insider Trading On Herbalife

(RTTNews) - The Securities and Exchange Commission or SEC said Tuesday that it has charged two men with insider trading after they learned that hedge fund manager William Ackman's hedge fund Pershing Square Capital Management LP formed a negative view of the nutritional supplements company Herbalife Ltd. (HLF) and planned to take a $1 billion short position in its securities.

A Los Angeles, California-based multi-level marketing company, Herbalife has garnered attention since 2012 after billionaire investor William Ackman of hedge fund Pershing Square Capital accused the company of running a pyramid scheme that would eventually fail.

Ackman's allegations have led to federal probes against Herbalife. Ackman holds a short position in Herbalife, which means that he is betting the company's stock will drop.

According to the SEC, Filip Szymik of New York City and Jordan Peixoto of Toronto engaged in insider trading in Herbalife securities ahead of Ackman's December 20, 2012 announcement of the views of Pershing Square on Herbalife.

Szymik learned from his roommate, then an analyst at Pershing Square, that Pershing Square planned to publicly announce its negative view of Herbalife.

Szymik tipped Peixoto, who purchased Herbalife stock using put options on December 19, 2012, one day before the announcement by Pershing Square. The SEC noted that as a result of his unlawful trading, Peixoto reaped $47,100 in illicit profits.

Sanjay Wadhwa, senior associate director of the SEC's New York Regional Office said, "Szymik and Peixoto chose to engage in illicit tipping and trading in advance of the announcement of market-moving information and today they are being held accountable for those offenses."

In a settled order against Szymik, the SEC found that he violated anti-fraud provisions in federal securities laws as well as SEC rules. The agency ordered Szymik to cease and desist from further violations, and pay a civil penalty of $47,100.

In the litigated order against Peixoto, the SEC has instituted cease-and-desist proceedings against him to determine whether he violated rules, and also to determine the appropriate relief.

HLF closed Tuesday's trading at $43.75, up $0.76 or 1.77 percent on a volume of 1.92 million shares.