Former Microsoft Finance Manager Settles Insider-Trading Charges Arising Out Of Nokia Acquisition
By: James W. Kraus
A former Microsoft senior finance manager agreed on Friday to settle charges that he traded on material nonpublic information about Microsoft’s acquisition of Nokia Corporation’s mobile phone business. The insider-trading charges were outlined in a complaint filed on the same day in U.S. District Court in Seattle by the SEC. The settlement, which includes a combination of disgorgement and civil penalties totaling nearly $380,000, is pending court approval.
According to the SEC’s complaint, John E. Hardy, III, was employed in Microsoft’s corporate financial planning and analysis group. While employed there, Hardy purchased put options after learning from highly confidential internal Microsoft documents that the company’s fiscal-year 2013 financial results would not meet Wall Street analysts’ expectations. On July 18, 2013, Microsoft issued an earnings release containing those financial results. Following the issuance of that release, Microsoft’s stock price decreased by more than 11%. Shortly after the announcement, Hardy sold the put options, realizing gains of approximately $9,000.
The complaint also alleged that Hardy purchased Nokia call options in August of 2013 after learning in the course of his work in the financial planning and analysis group that Microsoft was planning to acquire Nokia’s mobile phone business. The acquisition was announced publicly on September 2, 2013, resulting in the price of Nokia shares rising more than 30%. Hardy sold is Nokia call options shortly thereafter, resulting in profits of approximately $175,000.
The complaint asserted claims of violations of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Hardy consented to the entry of a judgment permanently enjoining him from violating those provisions of the securities laws. In addition, he agreed to disgorge all of his ill – gotten gains of $184,132, pay a one-time civil penalty of $184,132, and pay prejudgment interest of $11,389, for a total payment of $379,653 to resolve charges. He also agreed to a five-year bar from serving as an officer or director of a publicly-traded company.
On numerous occasions, Microsoft has publicly stated its “zero tolerance” of employees engaging in unauthorized insider trading. In its complaint, the SEC made a series of allegations concluding that Hardy had breached his duties to Microsoft and its shareholders by violating the company’s insider trading policy, as set forth in the Microsoft Employee Handbook.
As part of the settlement, Hardy neither admitted nor denied the SEC’s factual allegations. A complete copy of the SEC’s complaint can be found here.