http://www.sec.gov/litigation/litreleases/2013/lr22670.htm
https://www.sec.gov/litigation/complaints/2013/comp-pr2013-58.pdf
Insider trading is the trading of a public company’s or other securities by individuals with access to non-public information about the company.
Scott London was fired as a partner by KPMG LLP, a giant accounting firm, where he had spent about 30 years as an auditor. The Securities and Exchange Commission (SEC) claimed that Mr. London had passed on confidential information about five companies that KPMG audited to his friend Bryan Shaw, including shoe retailer Sketchers Inc. and Herbalife Ltd, a nutrition company. On April 11th, Mr. London was in Los Angeles federal court facing criminal insider-trading charges that could carry a five-year prison sentence and up to $250,000 in fines if he is convicted of conspiracy to commit securities fraud. Bryan Shaw, the one who received non-public information subsequently made more than $1.2 million in illicit trades based on London’s stock tips. Even though Mr. Shaw has not been charged criminally yet, Shaw’s lawyer has said that he expects his client to be.
Scott London’s path from KPMG LLP partner to subject of insider-trading investigations began with a casual conversation with Bryan Shaw on a Los Angeles-area golf course. In an interview, Scott London said, although he continued talking to Mr. Shaw by phone, he didn’t pass any documents to his friend. He said he gave Bryan Shaw “no real significant information.” Mr. London also mentioned that Bryan Shaw only gave him a discount on a watch, bought him dinners from time to time and “on a couple of occasions” gave him $1,000 to $2,000 in cash.” However, Harland W. Braun, a lawyer for Mr. London, had a somewhat higher estimate of how much Mr. London received. The government said, Mr. London “obtained personal benefits” more than $50,000 in cash and gifts, including a $12,000 Rolex watch.
Integrity is an essential characteristic for a CPA in the performance of professional services; it should not be subordinated to personal gains and advantages. If Scott London is a person of integrity, he would not give the earnings information of his clients to Bryan Shaw before it became public. He is the professional, know the business law best, and have an ethical obligation to keep the secret information of his clients. In accounting, loyalty requires that we keep financial and other information confidential when it deals with our employers and clients. A CPA should not divulge confidential client information unless the client specifically agrees.
Sometimes crime is just sad, people ruin their lives for no reason at all. This isn’t the first time a partner at a major auditing firm has been accused of passing insider information. Former Deloitte vice chairman Thomas Flanagan was sentenced to 21 months in prison last year after pleading guilty to insider trading on information he obtained about some of the firm’s accounting clients. The total number of people and firms accused by the SEC of insider trading since October 2009 has grown to more than 430. Guiding people to make moral choice should become the ultimate mission and pursue of moral education.
Xitong He 