Oshkosh Omigosh Again In New SEC Carter's Insider Trading Case

November 8, 2013

In 2010 and 2012, the BrokeAndBroker Blog reported about the Securities And Exchage Commission's investigations involving Carter's Inc.: Oshkosh Omigosh! As Feds Expand Charges Against Former Carter's Executives (October 20, 2012).  

On October 29, 2013, the Atlanta Office of the SEC announced that it had expanded, yet again, the scope of the case to include a civil action against Dennis Rosenberg, a retired hedge fund consultant and market analyst, who allegedly engaged in trading on inside information and, additionally, acted as a tipper to two investment advisers.

Keep in mind that the underlying Carter's case involved the first non-prosecution agreement entered into by the SEC since the announcement of the SEC's new cooperation initiative earlier in 2012. Under the terms of the agreement, Carter's agreed to cooperate fully and truthfully in any further investigation conducted by the SEC.

The SEC's Press Release in Rosenberg is reprinted below in full text with links to the prior cases.

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Litigation Release No. 22858 / October 29, 2013

Securities and Exchange Commission v. Dennis Rosenberg, Civil Action No. 1:13-CV-3559-AT (N.D. Ga.)

SEC Charges New York Investment Professional with Insider Trading

On October 29, 2013, the Securities and Exchange Commission filed a civil injunctive action in federal court in the Northern District of Georgia against Dennis Rosenberg ("Rosenberg"). The Commission alleges that Rosenberg traded in the securities of Carter's Inc., ("Carter's), the Atlanta-based public issuer and clothing marketer, on the basis of material non-public information provided by a former Carter's executive, and tipped two investment advisers about this information.

The Commission's complaint alleges that, between 2005 and 2010, Rosenberg, a retired hedge fund investment consultant and market analyst who had previously covered the stock of Carter's, traded in advance of market-moving news concerning Carter's anticipated earnings, after having been tipped by a former Carter's executive regarding the substance of the upcoming announcements. Rosenberg also disclosed this information to two investment advisers for two separate hedge funds, according to the complaint, who then also traded on the inside information. Rosenberg's total ill-gotten gains, losses avoided, and consulting fees (based on tips to one hedge fund client) totaled approximately $500,000, according to the complaint, while the combined losses avoided and profits by Rosenberg's tippees totaled approximately $2 million.

The Commission's complaint alleges that Rosenberg violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5. Without admitting or denying any of the allegations in the complaint, Rosenberg consented to the entry of an order enjoining him from future violations of these provisions, and ordering him to disgorge approximately $500,000 of ill-gotten gains and approximately $108,000 in prejudgment interest. The amount of civil monetary penalties to be imposed, if any, will be decided at a later date.

This is the second insider trading case that the Commission has brought in connection with its ongoing investigation of trading in the securities of Carter's, see SEC v. Eric Martin, et al.,http://www.sec.gov/litigation/litreleases/2012/lr22458.htm, and the Commission's fifth overall case as part of its broader Carter's investigation.See SEC v. Joseph Elles,http://www.sec.gov/litigation/litreleases/2010/lr21784.htm, SEC v. Joseph Pacifico, http://www.sec.gov/litigation/litreleases/2012/lr22517.htm, SEC v. Michael Johnson,http://www.sec.gov/litigation/litreleases/2012/lr22520.htm.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the Northern District of Georgia and the Federal Bureau of Investigation in this matter.

 SEC Complaint