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Note to Self: Don't Get Greedy With Call Options
Causing a huge spike in a company's options trading in the days before a big announcement pumps up the stock price isn't recommended as a way to slip under the radar of federal securities regulators.
But that's what Saiyed Atiq Raza allegedly did in September 2006 when his call option purchases were half of that day's option trading volume for Align Technology, Inc., which makes popular transparent teeth aligners.
Securities regulators accused him of trading on confidential company information that Align and OrthoClear Holdings, Inc., would settle long-running litigation.
Raza, formerly the president and chief executive officer of Advanced Micro Devices, agreed to fork over nearly $3 million to repay his profits plus a civil penalty, according to a settlement announced today by the Securities and Exchange Commission.
He did not admit or deny the allegations, but agreed not to serve as an officer or director of a public company for five years. There was no immediate comment from his lawyer, Thomas Carlucci.
According to the settlement filed in federal court in San Jose, California, Raza, 58, was a director of privately owned OrthoClear when it agreed to a top competing in the transparent teeth-straightening market with its primary competitor, Align, in return for a $20 million payment.
On September 22, two days after Raza learned this confidential information, he purchased 3,500 Align call options—accounting for more than 45 percent of the total Align option trading volume and 60,000 shares of Align common stock.
The following week, Align's stock price rose nearly 50 percent, netting Raza, of Palo Alto, California, a profit of $1,450,900.
by Elizabeth Olson
