U.S. Securities and Exchange Commission

Litigation Release No. 22404 / June 28, 2012

SEC v. H. Clayton Peterson et al., 11 Civ. 5448 (S.D.N.Y.) (RPP)

SEC Obtains Final Judgments On Consent Against All Defendants in the Mariner Energy Insider Trading Case

The SEC announced that on June 1, 2012, the Honorable Robert P. Patterson, United States District Judge, United States District Court for the Southern District of New York, entered Final Judgments on Consent as to former Mariner Energy, Inc. (“Mariner”) Director, H. Clayton Peterson (“Clayton Peterson”) and his direct and indirect tippees, Drew Clayton Peterson (“Drew Peterson”), Drew K. Brownstein (“Brownstein”) and Big 5 Asset Management, LLC (“Big 5”) in the SEC’s insider trading case, SEC v. H. Clayton Peterson et al., 11 Civ. 5448 (SDNY) (RPP).

In addition, on June 27, 2012, the SEC issued orders on consent in related administrative proceedings that suspend Clayton Peterson from appearing or practicing before the SEC as an accountant, and bar Drew Peterson and Brownstein from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The entry of these Final Judgments and the issuance of the administrative orders resolve all claims asserted by the SEC in this insider trading case.

In this enforcement action, the SEC alleged that in April 2010, Clayton Peterson, having learned through confidential board meetings that Mariner was about to be acquired by Apache Corporation, tipped his son, Drew Peterson about the acquisition and instructed him to purchase Mariner securities for Clayton Peterson’s daughter. Drew Peterson used the material nonpublic information he received from his father to trade Mariner securities for his own accounts, for his family members, his investment club and investment clients, and to tip certain friends, including Brownstein. Drew Peterson’s trading and the trading of his tippees, excluding Brownstein, resulted in profits of $205,416. Brownstein used the material nonpublic information he received from Drew Peterson to trade shares for his own account, for his family members and for hedge funds managed by Big 5, Brownstein’s registered investment advisory firm. Brownstein reaped approximately $4.6 million for Big 5 hedge funds, $305,050 for his family members and $130,671 for himself.

The Final Judgments entered against Clayton Peterson and Drew Peterson: (1) permanently enjoin them from violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5; and (2) order them to pay, on a joint and several basis with each other, disgorgement of $205,416 plus prejudgment interest of $13,603, for a total of $219,019. The Final Judgment against Clayton Peterson also bars him from serving as an officer or director of a public company. In addition, on June 27, 2012, the SEC issued an order in a related administrative proceeding pursuant to Rule 102(e)(2) of the SEC’s Rules of Practice suspending Clayton Peterson from appearing or practicing before the SEC as an accountant. Also on June 27, 2012, the SEC issued an order on consent in a related administrative proceeding pursuant to Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”) barring Drew Peterson from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.

The Final Judgment entered against Brownstein: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder; (2) orders him to pay disgorgement of $435,722, representing illicit profits that he gained in his personal accounts and his relatives’ accounts, plus prejudgment interest in the amount of $23,427, for a total of $459,150; and (3) orders him to pay, on a joint and several basis with Big 5, disgorgement of $4,148,262, representing illicit profits gained by Big 5 hedge funds, plus prejudgment interest in the amount of $274,709, for a total of $4,422,971. In addition, on June 27, 2012, the SEC issued an order on consent in a related administrative proceeding pursuant to Section 203(f) the Advisers Act barring Brownstein from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.

The Final Judgment entered against Big 5: (1) permanently enjoins it from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and (2) orders it to pay, on a joint and several basis with Brownstein, disgorgement of $4,148,262, representing illicit profits gained by Big 5 hedge funds, plus prejudgment interest in the amount of $274,709, for a total of $4,422,971.

http://www.sec.gov/litigation/litreleases/2012/lr22404.htm