The Securities and Exchange Commission (SEC) has filed charges against three individuals for illegally tipping and trading in Equifax securities prior to the company’s major announcement regarding a significant data breach in 2017.
In September 2017, Equifax publicly disclosed that it had experienced a data breach affecting approximately 148 million US customers, resulting in a nearly 20% drop in the company’s stock price. Prior to this announcement, the firm had sought assistance from a Chicago-based public relations firm to manage the impending fallout.
The SEC complaint highlights that Ann Dishinger, a finance manager at the PR firm, obtained insider information about the breach and shared it with her partner, Lawrence Palmer. Palmer allegedly contacted a former business client to facilitate the purchase of out-of-the-money Equifax put options in that client’s brokerage account, agreeing to split any resulting profits.
Palmer reportedly reimbursed the client for the cost of the options with a check referencing "Blue Horseshoe" in the memo, a phrase cited by the SEC as an allusion to coded language used in the movie Wall Street to relay insider information.
Additionally, Palmer is accused of tipping his brother and business partner, Jerrold Palmer, who then engaged in a similar trading scheme with a friend. The illegal trades are said to have generated approximately $35,000 and $73,000 in profits, respectively.
Though the brothers have not admitted to or denied the allegations, they have agreed to a judgment imposing civil penalties. The case involving Dishinger is still ongoing. This marks the third wave of insider trading charges brought by the SEC in connection with the Equifax breach; in 2018, two former Equifax employees—a chief information officer and a software engineering manager—were charged in a related case.