Securities regulators charged two Ameriprise Financial advisers and three others with insider-trading, saying they made $1.8 million in illicit profits based on confidential merger information one of the advisers learned through an Alcoholics Anonymous relationship.
The Securities and Exchange Commission said Timothy McGee, one of the advisers, was tipped about a pending merger of insurer Philadelphia Consolidated Holding Corp and Tokio Marine Holdings.
The SEC said he learned of the deal from a Philadelphia Consolidated senior executive who was confiding in him through their relationship at Alcoholics Anonymous about pressures he was confronting at work.
McGee purchased Philadelphia Consolidated stock in advance of a merger announcement on July 23, 2008, and tipped Michael Zirinsky, a fellow Ameriprise adviser, the SEC said.
Zirinsky bought stock for himself and also for accounts that belonged to his wife, mother and grandmother, the agency said. He also told his father, Robert Zirinsky, and a friend in Hong Kong, Paulo Lam, about the tip.
Lam in turn informed another friend, and that friend's wife, Marianna sze wan Ho, also traded on the non-public tip, the SEC said.
Altogether, the SEC said, the Zirinsky family made illegal profits of $562,673 and McGee made $292,128. Lam, meanwhile, made an illegal profit of $837,975 while Ho made $110,580.
Lam and Ho have agreed to settle the SEC's charges without admitting or denying the allegations, and pay $1.2 million and $140,000, respectively.
The SEC is pursuing penalties against McGee, Michael Zirinsky and Robert Zirinsky.
Attorneys for McGee and Robert Zirinsky could not be immediately reached for comment, and an attorney for Michael Zirinsky declined to comment. An attorney for Lam and Ho did not immediately respond to a message left outside of normal Hong Kong business hours.
(Reporting By Sarah N. Lynch in Washington, D.C.; Editing by Tim Dobbyn and Steve Orlofsky)