The SEC opened an investigation into Reed Smith’s client's purchases and sales of a Nasdaq-listed small-cap stock. On paper, it looked like a textbook insider trading case: the client built a position over a few weeks, and shortly after his last purchase, the company announced it was being acquired. The client sold for a modest profit, and the SEC came calling.

The Reed Smith team took the fight to the SEC through an attorney proffer that told a simple and powerful story: there was no inside information, period. The client is a career small-cap investor with over 30 years of experience and a disciplined, repeatable process for identifying opportunities based entirely on publicly available information. 

The Reed Smith team provided a comprehensive analysis of the client’s investment strategy, grounded in a rigorous review of publicly available information and focused on key performance metrics. The team further explained how the client's decision to purchase the stock was driven by the fact that it satisfied virtually all of his established investment criteria. The team showed the SEC that this was not a tip, but rather a process – one their client had used successfully for decades with many other stocks. At every step, the Reed Smith team explained the process to the client, ensuring he understood the strategy and was comfortable with each strategic decision.

A few weeks after the attorney proffer, the SEC sent Reed Smith a letter formally terminating the investigation, bringing welcome closure for the firm’s client.