The Securities and Exchange Commission claims a former AIG legal department employee tipped off his father of a pending insurance company acquisition and the elder man cashed in a $20,000 stock gain off the transaction.
Jon L. Aronson, 53, of Massachusetts, learned through his employment that AIG was negotiating an acquisition of Validus Holdings, an insurance company based in Bermuda, according to the SEC complaint filed in the U.S. District Court for the Southern District of New York.
Based on this information, Aronson purchased Validus shares and tipped his father, Elliet N. Aronson, 86, of Massachusetts, who also purchased shares, the complaint said.
Jon Aronson sold his shares and advised his father to do the same before the acquisition was announced, the complaint added, but Elliet Aronson opted to continue holding his shares, profiting $20,310 from his sales after the announcement.
According to the complaint, On December 8, 2017, the chief of staff to AIG’s board of directors updated the board on negotiations with Validus, stated that an acquisition was possible in the first quarter of 2018, and that the purchase price range then under consideration was between $65 and $70 per share.
The update was marked as "Strictly Confidential" and for internal use only, the complaint said.
The younger Aronson worked in the legal department of AIG Employee Services as a senior administrative assistant to the person who served as vice president of corporate governance and chief of staff to the AIG board of directors.
Jon Aronson purchased 550 shares of Validus over the ensuing weeks in three separate transactions, the SEC said. On Jan. 3, 2018, he supplied his father with inside information, the complaint said, and Elliet purchased 1,000 shares the following day.
"Jon L. Aronson knew or was reckless in not knowing that he breached a duty of trust and confidence owed to his employer when he purchased shares of Validus and tipped his father with the material, nonpublic information," the complaint said.
Recognizing the potential consequences of insider trading, Jon Aronson got cold feet, the SEC said, and sold all his Validus shares on Jan. 11, 2018. He advised his father to sell his shares as well, the complaint said, but Elliet Aronson held.
On Jan. 22, 2018, before the markets opened, AIG publicly announced its agreement to acquire all the outstanding common stock of Validus for $68 per share. Validus closed at $67.29 per share that day, a 44.03% increase over the prior trading day’s closing price of $46.72 per share.
Later that same day, Elliet Aronson placed a market order to sell 500 of the Validus shares held in a brokerage account, which was executed the same day. The actual profits on the 1,000 Validus shares he purchased totaled $20,310.72, the complaint said.
Without admitting wrongdoing, the Aronsons reached a settlement agreement with the SEC.
Both men agreed to pay civil penalties of $20,310.72, with the elder Aronson also relinguishing $20,310.72 in profits, plus $2,100.8 in interest, according to the proposed consent judgments the SEC filed Wednesday in federal court.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
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