Brazil’s First Insider Trading Conviction?

Dave Hoffman

Dave Hoffman is the Murray Shusterman Professor of Transactional and Business Law at Temple Law School. He specializes in law and psychology, contracts, and quantitative analysis of civil procedure. He currently teaches contracts, civil procedure, corporations, and law and economics.

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2 Responses

  1. Izabel Andrade says:

    The Brazilian market still lacks a rigorous enforcement regime. Most likely, this conviction was only possible because the Securities Exchange Commission brought up separate cases in the U.S. against three (not two) Brazilian citizens for similar insider trading offenses and they did not plead innocent. Once these cases were settled in the U.S., it became very easy for the Brazilian securities exchange commission (CVM) and the district attorney’s office in Sao Paulo to file charges against the offenders locally.

    It should be noted that in Brazil all three individuals were punished by the CVM with civil penalties and barring from officer positions at publicly traded companies, and two of the offenders were also tried in the Court of Justice (the third one settled with the district attorney’s office to avoid trial). They were sentenced to prison and to the payment of civil penalties, beside being barred from acting as officers in publicly traded companies.

    I suppose your student is confident that the ruling will be overturned because he has good reasons to distrust the Brazilian legal system. In my opinion the ruling should be overturned because these individuals have been tried three times for the same offense.

    Finally, the insider trading law became effective in Brazil in 2001. If the Brazilian enforcement authority were efficient, Brazil’s greatest swindlers whose fraud, embezzlement, income-tax evasion and other financial crimes amount to millions or billions of dollars would have been convicted already. These major offenders will NEVER go to jail — not as long as they have money to “distribute”, and the country is ruled by political power and corruption.

    Here’s a brief description of the cases brought up by the SEC:

    http://www.sidley.com/files/News/8e1b6a01-a749-45fb-a38f-b7e689b9d143/Presentation/NewsAttachment/f931c9e9-38ba-4027-9214-b8acf6583ec6/SECSpeaksFeb08.pdf

    SEC v. Luiz Gonzaga Murat Júnior;SEC v. Alexandre Ponzio
    De Azevedo and SEC v.Romano Ancelmo Fontana Filho.109 The
    SEC brought separate cases against Gonzaga Murat Júnior
    (Murat), former Chief Financial Officer and Director of
    Investor Relations at Sadia S.A. (Sadia), a Brazilian food
    products company, Romano Ancelmo Fontana Filho
    (Fontana), a former Sadia Director and Alexandre Ponzio De
    Azevedo, a former employee of Banco ABN AMRO Real
    S.A., an investment banking firm retained by Sadia. Murat,
    Fontana and Azevedo are alleged to have engaged in insider
    trading by purchasing securities of Perdigão S.A. (Perdigão)
    prior to Sadia’s tender offer for Perdigão announced on July
    16, 2006.110 All three defendants consented to the entry of
    final judgments imposing injunctive and monetary relief.
    Murat and Fontana also consented to the entry of final
    judgments barring them from acting as officers or directors
    of a publicly traded company for a period of five years.
    Fontana paid $142,848.95 in disgorgement and prejudgment
    interest and a civil penalty of $173,893.13, Murat paid
    $184,028.12 in disgorgement and prejudgment interest and
    a civil penalty of $180,404 and Azevedo paid $68,215.45 in
    disgorgement.

  2. Paddy Bear says:

    First insider trading conviction for BRAZIL? I’m sure there’s something wrong with that statement. As sure as I am that there’s going to be a lot more convictions down the line. I say this with as much confidence as my belief that too much Nutella will kill you: http://lawblog.legalmatch.com/2011/02/16/breaking-news-nutella-is-not-health-food/