The US Securities and Exchange Commission has filed insider trading charges against Robert Dobkin, co-founder and former Chief Technical Officer of Linear Technology Corporation, a Delaware corporation headquartered in California. Dobkin is alleged to have tipped two friends, one of whom allegedly tipped several individuals material non-public information about the impending merger of Linear with Analog Devices, Inc., a Massachusetts company, in 2016.
As recited in the statement of facts, between August 2015 and July 2016, Linear and Analog were engaged in merger discussions initiated by Analog. Beginning in June 2016, Dobkin was directly involved in these negotiations, participating in meetings between the management teams of the two companies until their joint press release, on July 26, 2016, announcing the merger. During this period, Dobkin was subject to Linear’s insider trading policy, which prohibited Dobkin for purchasing or selling Linear stock on the basis of material non-public information, including information about a pending merger. As an officer and employee of Linear, Dobkin owed the company and its shareholders a duty of trust and confidence, and was prohibited from disclosing material non-public information to outsiders.
Despite these duties, Dobkin is alleged to have tipped his friend Cynthia Braun on April 9, 2016, regarding the merger negotiations, and Braun, in turn, opened a personal account with a brokerage firm and bought Linear call options a few days later, telling the broker that she had a “family friend” who had advised her to trade options. Braun sold the call options when trading resumed after the merger was announced, realizing a profit of $42,826. According to the SEC, Dobkin also tipped his friend Michael Fiorillo about the merger with Analog during the same period, allowing Fiorillo, his wife and his mother, to realize profits of over $210,000 upon the sale of call options following announcement of the merger. According to the complaint, Fiorella communicated to his friend Jeffrey Gregersen the material non-public information acquired from Dobkin, allowing Gregerson to make valuable trades based on the information, which resulted in a profit of $70,083. Similarly, as alleged, Fiorella passed Dobkin’s information to his sister and brother-in –law, who used the information to trade in Linear securities in advance of the merger announcement, resulting in a profit of $5,177.
Along with Dobkin, Braun, Fiorillo and Gregerson have been charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 thereunder.