UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16173 / June 3, 1999

Securities And Exchange Commission v. Richard H. Ference and Kevin J. Kirkbride, 99 Civ. 4028 (LMM) (S.D.N.Y.)

SEC CHARGES TWO NEW YORK BANKERS WITH INSIDER TRADING

The Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of New York against two New York bankers, charging that for two years they engaged in an insider trading scheme involving over a dozen stocks. The complaint charges that the defendants’ trading generated illegal trading profits of over $430,000 on transactions that have been publicly announced plus additional profits involving transactions that have not been announced.

Named in the Commission’s complaint are:

• Richard Ference, 51, a resident of Greenwich Connecticut. Ference is a Vice President in the New York office of the Bank of Tokyo-Mitsubishi Trust Company.

• Kevin Kirkbride, age 30, a resident of Manhattan. From March 1997 until March 1999, Kirkbride was employed in the Investment Banking Division of Smith Barney, Inc., and its successor firm, Salomon Smith Barney, Inc.

According to the Complaint:

Ference and Kirkbride met and became friends while both were employed at Bank of Tokyo, where Ference supervised Kirkbride. In March 1997, Kirkbride left Bank of Tokyo and joined Salomon Smith Barney. Kirkbride and Ference then agreed to the insider trading scheme, whereby Kirkbride would tip Ference about confidential information concerning transactions by clients of the investment bank.

In order to hide their trading, the two agreed that Ference would do all of the trading and that he would pay one-third of the profits to Kirkbride, keep one-third for himself, and retain one third to pay taxes. Ference specifically instructed Kirkbride that, to avoid detection, Kirkbride should use only pay telephones or prepaid phone cards to contact Ference and that he should not keep any records of their transactions. Kirkbride was paid in cash by Ference, and told not to deposit any of the money into accounts, but should instead spend it only on "luxury" items.

During the course of his employment at the investment bank, Kirkbride obtained and disclosed confidential information to Ference concerning at least thirteen transactions contemplated by clients of the firm. Ference then purchased stock of those companies involved in these transactions. In addition, both Ference and Kirkbride did additional insider trading without telling the other. Ference made trades that he did not disclose to Kirkbride. On at least six occasions, Kirkbride made trades through an account in his own name that he maintained away from his employer, in clear violation of the firm’s policies. Ference and Kirkbride collectively realized over $430,000 in illegal insider trading profits on transactions that have been publicly announced plus additional illegal profits involving transactions that have not been announced.

In its complaint, the Commission charges that Ference and Kirkbride violated antifraud provisions of the Securities Exchange Act of 1934, Sections 10(b) and 14(e), and Exchange Act Rules 10b-5 and 14e-3. The relief sought includes injunctions against future violations, disgorgement of insider trading profits, prejudgment interest on that amount, and civil penalties.

Also today, the United States Attorney for the Southern District of New York announced criminal charges against Ference and Kirkbride. A fifteen count indictment charges Ference with one count of conspiracy to commit securities fraud, thirteen counts of securities fraud, and a count of fraud in connection with a tender offer. In a criminal information, Kirkbride was charged with conspiracy to commit securities fraud and one count of securities fraud.

The Commission acknowledges and appreciates the assistance provided by the National Association of Securities Dealers Regulation, Inc. in the investigation of this matter.