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Friday, June 14, 2024 | Back issues
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Inside Trading All in the Family, SEC Says

CHICAGO (CN) - The SEC claims six members of a family made more than $1 million by trading on inside information about the purchase of a railway company where two family members worked. And uncle and nephew who worked for Florida East Coast Railway tipped off the nephew's family, who spent more than $1.6 million buying up shares of the railway's corporate parent before the $3.5 billion acquisition was announced, the SEC says in its federal complaint.

The uncle, W. Gary Griffiths, and his nephew, Cliff M. Steffes, worked for Florida East Coast Railway, a wholly owned subsidiary of Florida East Coast Industries (FECI), the SEC says. They learned that FECI was about to be acquired by another company, and tipped off Steffes' father, who also is Griffiths' brother in law, according to the complaint. The father, Rex C. Steffes, tipped his brother, Robert J. Steffes, and three "business associates," and the nephew, Cliff, tipped his own brothers, Bret and Rex R. Steffes, according to the complaint.

"As part of this process, Rex C. Steffes provided each of his sons with $10,000 for the purchase of FECI securities," the SEC says.

The complaint continues: "On May 8, 2007, prior to the opening of trading on the New York Stock Exchange, FECI announced that it had entered into a definitive agreement with Fortress Investment Group LLC ('Fortress') to be acquired in a $3.5 billion transaction. FECI's stock price closed at $84.91 per share that day, a nearly 15 percent increase from its closing price on the prior day.

"After FECI's acquisition was publicly announced, these individuals realized more than $1 million in profits from their trading on material nonpublic information. These individuals exploited their personal and family relationships for monetary gain. Their misuse of confidential information gave them an illegal advantage over other traders in the market."

The SEC seeks disgorgement, penalties and an injunction.

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