The wife of Ching Hwa Chen was the senior tax director of Informatica, a data integration company. In late June 2012, Informatica learned it would miss its revenue guidance for the first time in 31 consecutive quarters. That revenue miss caused Chen’s wife to work more than usual as the company scrambled to close its books and prepare for a potential prerelease of its quarterly revenues. Over the next several days, Chen overheard his wife’s phone calls addressing the revenue miss, including on a four-hour drive to Reno, Nevada, where his wife fielded calls from the passenger seat as he drove. Early the next week, convinced that Informatica’s stock would lose value, Chen bet heavily against the company, shorting its stock, buying put options, and selling call options. In early July, after announcing the miss, Informatica’s stock price fell 27 percent from $43 to $31. Chen closed out all of his positions that same day, making a large profit. Was Chen found liable for insider trading under Securities Exchange Act Rule 10b–5?
