Core Summary

  • The U.S. Securities and Exchange Commission (SEC) charged Comtech Telecommunications' former CEO Ken Peterman with insider trading, alleging he sold his shares before the company's negative quarterly earnings report.
  • The SEC stated in a Wednesday announcement that Peterman allegedly disregarded a trading blackout period and sold Comtech stock on March 12, 2024, just hours after being informed he was terminated for cause, and eight days after receiving a presentation detailing the financial results.
  • "There is no gray area when it comes to trading on material nonpublic information and breaching fiduciary duties," Tejal Shah, Deputy Director of the SEC's New York Regional Office, said in the statement. "Executives like the defendant, with decades of experience as CEOs, should know that using confidential company information for personal gain is illegal."

In-Depth Analysis

The charges against Peterman are just the latest action by the SEC, which is in some ways the most aggressive enforcement division in its history. In fiscal year 2024, the SEC obtained $8.2 billion in financial remedies through 583 enforcement actions, a record high for the agency, including a record $6.1 billion in disgorgement and prejudgment interest.

The SEC's enforcement targets range from fraudsters using social media to promote financial scams, companies violating whistleblower protection rules, and broker-dealers, investment advisers, and credit rating agencies that failed to prevent employees from communicating through unauthorized channels.

In March of this year, the SEC charged Arista Networks founder Andreas "Andy" Bechtolsheim with insider trading. The SEC said Bechtolsheim agreed to pay nearly $1 million in civil penalties to settle the charges.

In the recently filed complaint, the SEC alleged that Peterman sold company stock shortly after leaving Comtech and while knowing the earnings report was imminent. The SEC said Peterman avoided losses of approximately $12,445 by trading before the March 18, 2024 earnings release, on which day the company's stock price fell more than 25%.

The SEC also noted that Peterman allegedly instructed his financial advisor to sell additional shares held in a joint account, but a trading blackout prevented the sale. Had that trade been completed, Peterman would have avoided losses of approximately $110,000.

The U.S. Attorney's Office for the Eastern District of New York said in a Wednesday statement that Peterman was arrested in San Diego on Wednesday and will later be arraigned in the Eastern District of New York. If convicted of securities fraud, Peterman faces up to 25 years in prison; if convicted of wire fraud, up to 20 years. Peterman could not be immediately reached for comment.

"My office will vigorously prosecute those like Peterman who seek to enrich themselves at the expense of ordinary investors and the integrity of the securities markets," Breon Peace, U.S. Attorney for the Eastern District of New York, said in the statement.