Perhaps marking a new focus on what has been described as the "netherworld" of Wall Street, the Securities and Exchange Commission has charged two former Wells Fargo employees with violating federal securities laws by using knowledge of nonpublic impending upgrades or downgrades in certain securities to generate more than $100,000 in illicit gains. Gregory T. Bolan, Jr., 37, and Joseph C. Ruggieri, 35, are charged with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Notably, the Commission has chosen to file the action as as administrative proceeding, and is seeking injunctive relief, disgorgement of ill-gotten gains, and the imposition of civil monetary penalties. Due to the highly expedited nature of administrative proceedings, an evidentiary hearing must take place within 60 days.
The Allegations
In an Order Instituting Administrative Proceedings, the Commission alleges that Bolan, who was previously employed as a research analyst in Wells Fargo's research department, repeatedly tipped Ruggieri and an unnamed deceased individual of impending upgrades and downgrades to various securities he covered in the health care industry. Ruggieri was employed as a senior trader of health care stocks at Wells Fargo, and was responsible not only for entering customer orders but also for placing principal trades for Wells Fargo's account. Because Bolan was widely followed and respected in the health care sector, his ratings had the ability to significantly influence the short-term price direction of various securities. After being tipped by Bolan of an impending upgrade or downgrade, Ruggieri would allegedly either purchase or sell short the relevant company's stock ahead of the announcement.
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