Former Qualys exec charged with insider trading after protecting brothers from financial loss
A former senior executive of cloud security and compliance firm Qualys has been charged with insider trading.
Security
The US Securities and Exchange Commission (SEC) announced the charges on Thursday. At the heart of the case is the former Chief Commercial Officer (CCO) of the Redwood City, Calif.-based firm, who tipped off his family in light of looming financial results.
According to the complaint, Amer Deeba gave his two brothers shares in the company in 2005.
In 2015, Deeba knew poor financial results were on the horizon which would wipe value off the company, as Qualys had not managed to achieve an internal Q1 2015 sales forecast.
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In possession of this knowledge, Deeba allegedly told his brothers about the sales failure, which would serve as a basis for investor revenue guidance.
Going further, the former executive allegedly contacted the brokerage firm managing the brothers' shares to sell off all of the stock.
When the financial results were announced, the firm's revenue guidance went into a downward spiral, causing share prices to plummet by 25 percent.
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Deeba allegedly sent a message to his brothers, saying "we announced the bad news today."
According to SEC, the scheme helped the brothers avoid "losses of over half a million dollars."
"Although Deeba made no profits from his conduct, Deeba's brothers collectively avoided losses of $581,170 by selling their Qualys stock," the agency added.
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The insider trader is not expected to wind up in court for his alleged actions. Instead, the former executive -- who resigned from his position earlier this month -- is due to settle out of court with SEC.
Subject to court approval, Deeba will pay a penalty of $581,170 and will not be allowed to take an officer or director position at any company reporting to SEC for the next two years.
ZDNet has reached out to Qualys and will update if we hear back.