The SEC continued what appears to be a growing trend of bringing insider trading cases as administrative proceedings. Since the beginning of September the Commission has filed at least four insider trading actions as administrative actions rather that civil injunctive cases (here). The list now extends to five with the filing of In the Matter of Steven Durrelle Williams, Civil Action No. 3-146246 (November 3, 2014).
Mr. Williams was the CEO of Intellicheck Mobilisa, Inc., a provider of identity systems products and wireless security applications. In August 2012 he filed a Form 144 indicating an intent to sell company shares.
In the third quarter of 2012 the revenue for the firm declined. A typical bump in sales that had been experienced in prior years during the period did not materialize. Beginning on September 14, and continuing for the next four days, Mr. Williams was involved in a series of communications regarding the potentially disappointing quarter.
On September 14 Mr. Williams also spoke positively about the company and its business prospects with an Investor. He told the Investor Intellicheck was working closely with some large potential customers who were expected to place orders soon. Five days later, on September 19, the investor made the first of two purchases of Intellicheck shares. On that date and the next the Investor’s purchases represented about 80% of the trading volume.
The day before the Investor’s first purchase Mr. Williams entered a day order to sell 270,000 of his 420,395 shares in the company. The order, with a limit price of $1.90, did not fill. The next day, while the Investor was purchasing, Mr. Williams entered a sell order for 200,000 at a limit price of $1.83. This time 98,700 shares were sold. A portion of the proceeds from that sale were used to exercise options. On September 20 Mr. Williams ordered the sale of the remaining 101,300 shares. This time 93,187 were sold.
On November 8 Inellicheck released its disappointing third quarter results. The stock closed down from the prior day’s close 11.6%. Over the next two days the price continued to decline. Mr. Williams avoided losses of $103, 712. The investor suffered at least $98,514 in damages from Mr. Williams’ conduct, according to the Order which alleges violations of Securities Act Sections 17(a) and Exchange Act Section 10(b).
To resolve the proceeding Mr. Williams consented to the entry of a cease and desist order based on the Sections cited in the Order. The order also prohibits Mr. Williams from serving as an officer or director of any issuer for two years and requires that he pay $103,712 in disgorgement, prejudgment interest, and a civil penalty of $75,000.
