Client's insider trading tips land ex-broker in prison

A client's hot stock tips on pharmaceutical deals netted his adviser and himself tens of thousands of dollars ― and the attention of regulators.

Now the adviser has been sentenced to six months in prison for an insider trading scheme that extended over eight years, according to federal prosecutors.

"David Hobson used his relationship with a childhood friend to obtain inside information, and then traded on that information, making hundreds of thousands of dollars in illegal profits," Acting U.S. Attorney Joon Kim said in a statement.

Hobson was sentenced last week in federal court in Manhattan, according to the U.S. Attorney's office for the Southern District of New York. Judge Laura Swain also ordered Hobson, 48, to forfeit over $385,000 and sentenced him to an additional two years of supervised release.

Hobson, a former Oppenheimer & Co. broker, previously pleaded guilty in October.

"I believe it was a fair sentence," says his attorney, Michael Barrows, who is with the Law Offices of Anthony A. Capetola in Williston Park, New York.

Barrows noted that the punishment was lighter than what prosecutors requested, and that Hobson's lack of previous offenses played a role.

"He had an unblemished career for 22 years," Barrows says.

FINRA BrokerCheck records lists no client complaints during his career.

CHILDHOOD FRIENDS?

Hobson and former client Michael Maciocio had been friends since they were kids, authorities say. However, Barrows disputes the closeness of their relationship, saying they merely knew one another since childhood.

Maciocio, 47, had been Hobson's client for several years, according to authorities.

From 2008 to 2014, the adviser and client engaged in a scheme to trade stocks in advance of acquisitions and transactions under consideration by the pharmaceutical company where Maciocio worked, say authorities, who did not name the firm.

FBI office in Miami Bloomberg News
The Federal Bureau of Investigation's office in Miami, Florida is pictured on Friday, June 23, 2006. Seven men were indicted in Miami on charges of plotting to blow up the Sears Tower in Chicago, the FBI building in Miami, Florida and other federal buildings. Photographer: Richard Sheinwald / Bloomberg News.

Maciocio served as a master planner in his company's active pharmaceutical ingredient supply chain group ― a position that occasionally required him to give input on the impact of potential acquisitions, and therefore allowed him to learn of impending transactions, according to authorities.

He didn't know the names of potential acquisitions, but he was able to figure out their identities because he knew his company's code names for acquisitions, drug indications, dosages and the chemical structure of the drugs, prosecutors say.

Maciocio then traded on that information and provided it to Hobson, who also used it for trades on behalf of other clients.

Hobson netted about $165,000 for himself, while Maciocio pocketed $40,000, according to authorities. Hobson also reaped almost $150,000 for other clients, based on his insider knowledge.

The budgeting app has already garnered support from NBA superstars and is looking for more growth.

10h ago
3 Min Read
Portrait of smiling girl with piggy bank in classroom

The retirement crisis looms larger than ever as new research shows how many U.S. adults have no long-term savings.

March 28
3 Min Read

As managing director and lead of Kotter's European practice, Nick Petschek draws on his wide skill set to help organizations formulate and achieve their strategy and culture goals. Nick aids clients in surfacing the delta between organizational aspirations and reality, closing that gap together. His career journey has been one of constant curiosity and learning. From the awe-inspiring circus to the nimble world of unicorn startups, to the process-oriented United Nations, he has tackled challenges related to telling a compelling story and envisioning a new future, scaling, sustainability, and culture transformation. His clients have ranged in size and industry, with a focus on technology and government.

March 28
Headshot of Nick Petschek

Maciocio, 47, pleaded guilty to securities fraud in May 2016. His sentencing has not been scheduled. His attorney could not be reached for immediate comment.

Hobson had been an adviser since 1994; he started his career at Dickinson & Co., a brokerage firm FINRA expelled in 1998, according to BrokerCheck records. He later worked at RBC before moving to Oppenheimer in 2010.

A spokesman for Oppenheimer said the company "cooperated extensively with government authorities throughout the course of their investigation."

Hobson has not worked at the company since May 2016, according to BrokerCheck records. Barrows confirmed his departure.

A parallel case involving SEC charges against Hobson has not yet been resolved.

The U.S. Attorney's office credited the regulator, as well as the FBI, with assisting the investigation.

For reprint and licensing requests for this article, click here.
Fraud Securities fraud Regulatory actions and programs U.S. Attorneys Office SEC FBI
MORE FROM FINANCIAL PLANNING