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SEC charges Toronto man for Herbalife short position

2014-10-01 12:58 ET - Street Wire

See Street Wire (C-*SEC) U S Securities and Exchange Commission

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by Mike Caswell

The U.S. Securities and Exchange Commission has filed an insider trading case against a Toronto research analyst who acquired a short position in Herbalife Ltd., the nutrition company that Bill Ackman called an illegal pyramid scheme in 2012. The SEC says that the analyst learned about Mr. Ackman's theory on Herbalife in advance through a friend. He also learned that Mr. Ackman would make his theory public on Dec. 20, 2012, and he then traded based on that information, the SEC says.

The allegations are contained in an administrative order instituting proceedings the SEC filed on Tuesday, Sept. 30, against Jordan Peixoto. The order identifies Mr. Peixoto, 30, as a Canadian who was working in New York as a research analyst in 2012. The SEC cites him for acquiring a put option in Herbalife the day before Mr. Ackman released his theory on the stock, sending it into a steep decline.

According to the SEC, Mr. Peixoto sold several other securities on Dec. 19, 2012, and used the proceeds to take the short position in Herbalife. Prior to that date he had never traded options or Herbalife. The next day, Mr. Ackman held a three-hour news conference to present his theory on Herbalife, telling attendees that he thought the company was an illegal pyramid scheme. He also disclosed that his firm, Pershing Square Management LP, held a $1-billion short position in the stock. (All figures are in U.S. dollars.)

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