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Monday, September 8, 2014

SEC CHARGES RESIDENTIAL REAL ESTATE DEVELOPERS WITH INSIDER TRADING BASED ON TIP FROM ACCOUNTANT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission charged two residential real estate developers with insider trading in the stock of a restaurant company based on a tip from their accountant in advance of a tender offer announcement.

The SEC alleges that accountant Donald S. Toth disregarded his fiduciary duty to a client when he illicitly purchased stock in O'Charley's Inc. — which operates or franchises restaurants under the brands O'Charley's, Ninety Nine Restaurant, and Stoney River Legendary Steaks - after the client revealed to him in a tax-planning meeting that Fidelity National Financial was planning to purchase the company. Toth contacted his financial advisor within the hour after this meeting with the O'Charley's board member and began making plans to purchase 5,000 shares of O'Charley's stock. Toth also tipped two other clients, including Blair G. Schlossberg. Schlossberg tipped his business partner Moshe Manoah and they jointly invested in O'Charley's stock using a brokerage account held in the name of Manoah's wife.

According to the SEC's complaint filed in federal court in Tampa, Fla. against Schlossberg and Manoah, when the tender offer was publicly announced approximately two months later, the price of O'Charley's stock closed 42 percent higher than the previous trading day. Schlossberg and Manoah's insider trading activity garnered illegal profits of more than $90,000.

The two have agreed to pay a combined total of more than $190,000 to settle the SEC's charges.

Schlossberg and Manoah are charged with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. Without admitting or denying the allegations, they consented to the entry of judgments permanently enjoining them from violating these provisions of the securities laws. The settlements are subject to court approval.

Schlossberg, who lives in Holmes Beach, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

Manoah, who lives in Davie, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

The SEC's investigation was conducted by Elizabeth P. Skola with assistance from Aaron W. Lipson and Robert Schroeder in the Atlanta Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

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