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In the Matter of Cady, Roberts & Co. | 40 S.E.C. 907 (1961)
Allowing people in possession of nonpublic information to take advantage of their knowledge in securities transactions undermines the integrity of the securities market. In In the Matter of Cady, Roberts and Company, we explore how antifraud provisions in securities laws combat that problem.
Robert Gintel, a broker at Cady, Roberts and Company, a stock brokerage firm, managed various discretionary investment accounts, many of which held shares in Curtis-Wright Corporation. In 1959, Curtis-Wright’s directors decided to declare a quarterly dividend lower than that from previous quarters. The directors authorized immediate communication of the decision to the New York Stock Exchange and Dow Jones News Ticker Service, but technical difficulties delayed public release by approximately an hour.
In the meantime, one of the directors, J. Cowdin, who was also an associate at Cady Roberts, phoned Gintel to inform him of the decision. Knowing that reduced dividends would diminish the value of Curtis-Wright stock, Gintel immediately entered sell orders to minimize the impact on his clients’ accounts. Those orders were executed before the dividend decision became public knowledge, at which point stock prices dropped. The Exchange issued Gintel a three-thousand-dollar fine for improper trading.
Additionally, the Securities and Exchange Commission, or SEC, initiated proceedings to determine whether Gintel and Cady Roberts willfully violated securities laws, prompting Gintel and Cady Roberts to propose a settlement limiting sanctions to Gintel’s suspension from the Exchange for twenty days.
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