ALJ Dismisses SEC Insider Trading Case

Case: In re: Bolan, et al.

Issue: Whether the U.S. Securities & Exchange Commission (SEC) sufficiently proved that George T. Bolan, Jr., a former Wells Fargo research analyst, received a personal benefit after he gave Joseph C. Ruggieri, a former Wells Fargo trader, material, non-public information about rating changes on health care stocks.

Case Summary: The SEC’s insider trading enforcement action against former Wells Fargo senior trader Joseph C. Ruggieri was dismissed by its own administrative law judge on the grounds that the agency failed to prove that Ruggieri was tipped in exchange for a personal benefit.

The SEC brought an enforcement action against George T. Bolan, Jr., a former Wells Fargo research analyst, and Joseph C. Ruggieri, a former Wells Fargo senior trader, alleging that Bolan tipped Ruggieri with inside information contained in confidential research reports regarding upcoming rating changes of certain health care stocks. Ruggieri then used this “inside” information to earn over $117,000. The SEC argued that in exchange for the tips, Boland received career mentorship and positive feedback that improved Bolan’s chances of a promotion.

Following a twelve-day hearing, Judge Patil found that Ruggieri used Bolan’s tips, but dismissed the enforcement proceeding on the grounds that the SEC did not sufficiently prove that Bolan received a personal benefit, as required under United States v. Newman, 773 F.3d 438 (2d Cir. 2014) and the U.S. Supreme Court’s decision under Dirks v. SEC, 463 U.S. 646 (1983).

Judge Patil held that the SEC lacked circumstantial evidence to sufficiently link Ruggieri’s mentorship to Bolan’s tips, writing that “it was more plausible that Ruggieri’s feedback was genuine, and that Bolan sought feedback as a standard practice.” Judge Patil said that Bolan’s communications reflected his “longstanding disregard of compliance rules” with disclosing material, non-public information,” but found it was more likely that Bolan tipped Ruggieri simply because “he could not follow the rules and keep his mouth shut.”

Bottom Line: Boland settled with the SEC in May and paid a $75,000 penalty. Boland was not required to admit or deny misconduct and did not receive an industry bar.

About Thomas Pinder

Thomas Pinder
Thomas Pinder is senior vice president and senior counsel for litigation in the office of ABA's general counsel.
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