HIGH PROFILE INSIDER TRADING PROBE

Professional golfer Phil Mickelson was reportedly interviewed by the FBI last Thursday in connection with an ongoing Securities & Exchange Commission insider trading probe. According to the Wall Street Journal the SEC is looking into whether well know investor Carl Icahn and others improperly traded on non-public information. Mickelson is not believed to be a specific target of the investigation.

Photo by Steven Newton CC Attribution 2.0 Generic

While there are many unanswered questions, the basic facts are that in February 2011 Icahn began investing in Clorox, Co. and in short time accumulated a 9.1% stake in the company. Then on July 15, 2011 Icahn made a 10.2 billion dollar offer to purchase the company.

As a result of this tender offer the stock price jumped significantly. There was apparently suspicious options trading activity in the days leading up to the tender offer. While not stated specifically the question is whether Icahn tipped off others about the tender offer who then purchased options prior to the tender offer being announced. Based on the limited factual information available, it is unclear what specific securities laws, if any, may have been violated.

The Wall Street Journal also reported that this particular probe is part of an increased focus by the SEC on insider trading since 2008. During this time 90 people have been formally charged leading to a whopping 85 convictions and guilty pleas. The remaining 5 cases remain pending.

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