SEC CHARGES ATTORNEY WITH INSIDER TRADING IN ADVANCE OF MERGER ANNOUNCEMENT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/16/2015 02:10 PM EDT

The Securities and Exchange Commission charged a Pennsylvania attorney with insider trading in the stock of Harleysville Group, Inc. in advance of the 2011 announcement of a $760 million merger of Harleysville and Nationwide Mutual Insurance Company.

According to the SEC’s complaint, Herbert K. Sudfeld illegally traded on the news that sent Harleysville’s stock price up 87 percent when the merger of the two insurance companies was announced in September 2011.  At the time, Sudfeld was a real estate partner at a law firm that advised Harleysville on the merger.  Sudfeld was not involved in the merger and learned that the announcement of it was imminent from a conversation between an attorney working on the transaction and their shared legal assistant.  Sudfeld allegedly stole the inside information and purchased Harleysville stock in his and his wife’s accounts.  Once the merger was announced, Sudfeld sold all the shares he had purchased, realizing approximately $79,000 of illegal profits.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania today announced criminal charges against Sudfeld.

“We allege that Sudfeld breached his duties of trust and confidence owed to his law firm when he misappropriated information about the merger to enrich himself,” said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit.  “The Commission will continue to aggressively pursue attorneys and other professionals who abuse their access to confidential information.”

The SEC’s complaint filed in federal court in Philadelphia names Sudfeld’s wife, Mary Jo Sudfeld, as a relief defendant for the purpose of recovering insider trading profits in her brokerage account through trades conducted by Sudfeld.  The complaint charges Sudfeld with violating antifraud provisions of the federal securities laws and an SEC antifraud rule.  The SEC seeks a permanent injunction and financial penalties against Sudfeld and return of allegedly ill-gotten gains and prejudgment interest from Sudfeld and Mary Jo Sudfeld.

The SEC’s investigation has been conducted by Kelly L. Gibson, Assunta Vivolo and John Rymas of the SEC’s Market Abuse Unit in the Philadelphia Regional Office.  The case is being supervised by Mr. Hawke and G. Jeffrey Boujoukos.  The litigation will be led by David A. Axelrod and John V. Donnelly of the Philadelphia Office.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation.