The SEC settled charges with a junior auditor at Ernst and Young. They announced this action on March 14, 2017.
The auditor in question is named Nima Hedayati and he worked at Ernst & Young. He ended up paying a fine of more than $87,000 to settle charges with the Securities and Exchange Commission. He paid disgorgement of $43,028, $1,270 in interest and $43,028 in penalties.
He is also suspended from appearing and practicing before the SEC as an accountant. If he actually did earn a degree in accounting, he might as well throw it in the trash.
What happened
Hedayati found out the Lam Research Corporation was going to acquire KLA tencor corporation. Both of these companies manufacture equipments used to manufacture semiconductors. They are both silicon valley companies based in California.
Nima did a little online research and found out that this news had not broken yet, so he tipped off his fiancée and his mother. After the merger plans became public, KLA’s stock price rose nearly 20%. Nima and his mother made nearly 43,000 off the trades.
EY terminated Hedayati after the discovery was made
The SEC said the following
Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s nonpublic information in a quest for an easy profit, and it wound up costing him a lot more in the end
I love the quotes from the SEC.
Conclusion
Mr. Hedayati apparently did not take Ernst & Young’s onboarding training about insider training. He must have also skipped out on all those business law classes in school. I’m guessing he most likely faked his accounting degree and credentials to get his job at EY. I feel like most of my accounting classes always discussed Enron or insider trading at some point, so I’m not sure how this kid missed the memo. I’m not sure who to be more disappointed in Nima or EY for hiring him.
What was his interview like. Was the only requirement for his position to be breathing? Was he even aware that he was working for an accounting firm. How do you go to the big 4 and not know about insider trading.
Additionally I feel sorry for future generations at EY because they are going to be paying for this as well. EY’s response to this will not be to increase hiring standards. Nope.
I can guarantee you that EY’s main response to this will be to increase insider trading training for new hires and current employees. You will have to take 20 CPE hours of insider trading. Especially since EY had a terrible year with sanctions from the SEC.
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