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Tuesday, October 28, 2014

SEC CHARGES HEDGE FUND MANAGER WITH INSIDER TRADING USING MATERIAL, NONPUBLIC INFORMATION IN ADVANCE OF NEWS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23118 / October 24, 2014
Securities and Exchange Commission v. Stephen E. Slawson, Civil Action No. Number1:14-cv-3421
SEC Charges New Jersey-Based Hedge Fund Manager with Insider Trading in Carter's Stock

The Securities and Exchange Commission today filed insider trading charges against a New Jersey-based hedge fund manager who allegedly used material, nonpublic information to trade in advance of market-moving news concerning Carter's Inc.

Stephen Slawson, who lives in Lebanon, N.J., and was co-founder and former manager to a hedge fund named TCMP3 Partners L.P., becomes the eighth individual that the SEC has charged in connection with the agency's investigation into insider trading and other misconduct involving the securities of the Atlanta-based marketer of children's clothing.

According to the SEC's complaint filed in federal court in the Northern District of Georgia, Slawson conducted insider trading on at least eight occasions in the hedge fund's accounts or personal accounts belonging to him or other family members. Slawson was initially tipped with nonpublic information about Carter's by a hedge fund investment consultant named Dennis Rosenberg, who received the inside information from a Carter's executive. Slawson later communicated directly with that executive: Eric Martin, who at the time was vice president and director of investor relations.

The SEC alleges that based on the illegal tips that Slawson received from Rosenberg and Martin, his insider trading in Carter's stock generated more than $500,000 in profits or avoided losses.

The SEC's complaint alleges that Slawson violated the antifraud provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a permanent injunction, disgorgement with prejudgment interest and civil monetary penalties pursuant to Section 21A of the Exchange Act.

Previously, the U.S. Attorney's Office for the Northern District of Georgia announced that a grand jury had indicted Slawson and charged him with one count of conspiracy to commit securities fraud and wire fraud, 25 counts of securities fraud, and nine counts of wire fraud, based on substantially similar conduct as alleged in the SEC's complaint. He is awaiting a trial in the criminal case.

The SEC, whose investigation continues into insider trading of Carter's stock, appreciates the assistance of the U.S. Attorney's Office for the Northern District of Georgia and the Financial Industry Regulatory Authority.

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