British Pair Settle Insider Trading Suit : Broker in L.A., Partner Said to Have Lost $21,700

Two British stockbrokers, one in Los Angeles and the other in London, lost $21,700 on an ill-fated foray into the mostly lucrative world of insider trading, U.S. regulators said in a lawsuit Tuesday.

The brokers, who also lost their jobs, are Geoffrey Collier, a former managing director of Morgan Grenfell Securities Ltd. of London, and Michael Cassell, a former director and registered representative at Vickers da Costa Securities in Los Angeles.

Both consented to entry of court orders barring them from violating securities laws in settlement of the suit, which was filed in U.S. District Court in Los Angeles by the Securities and Exchange Commission.

Collier admitted the allegations in the complaint, while Cassell neither admitted nor denied them.

First to Be Sentenced

Last July, Collier pleaded guilty in London to criminal charges in the same matter and reportedly was the first person sentenced under Britain’s 1985 insider trading law. He was fined the equivalent of about $40,000 and given a suspended one-year prison term. The SEC said Tuesday that it received the case from its British counterpart, which “provided invaluable assistance.”

Collier now lives in New York. His Washington attorney, Howard Schiffman, said the SEC agreed not to seek sanctions against his client, which paves the way for Collier to “make a fresh start” in the securities industry. Cassell, who was not charged in the criminal case in England, has not re-entered the securities business, SEC attorneys said. Neither Cassell nor his attorney could be reached for comment Tuesday.

According to the suit, the two men met earlier when they worked for Vickers in New York and remained close friends and business associates. In late 1986, they launched the transatlantic trading venture that brought them to grief.

Trading under the name of a Caribbean corporation that the two had organized, they bought securities of two British firms, Cadbury Schweppes and Associated Engineering, on the London Stock Exchange, the SEC suit said.

Collier has admitted receiving material, non-public information about potential takeover bids for the two firms by Morgan Grenfell investment banking clients. The suit said the trades were handled by Cassell at Vickers da Costa, which Citicorp bought from the British owners early this year.

Call Options Purchased

According to the SEC suit, the following sequence of events took place in late 1986:

Call options in Cadbury stock were bought for $65,981 on Oct. 15 in the name of Pureve Ltd., a Cayman Islands firm that Collier and his family owned. Although Vickers records did not reveal it, the options allegedly were for the benefit of Cassell, Collier and another Vickers employee not named in the suit. (Call options give the holder the right to buy shares of a company at a specified price within a specified period of time.)

Allegedly acting again on Collier’s inside information, Cassell called the Vickers trading desk in London from his Los Angeles home on Nov. 3. Cassell bought 60,000 Associated Engineering shares under an arrangement in which he allegedly was to get 40% of the profits.

As luck would have it, news of a bid for AE at a higher price was made public about the same time, and Cassell had the shares sold the same day at the higher price.

However, one of the securities firms from which Vickers bought the stock to fill Cassell’s order complained about the timing. Vickers began an inquiry and questioned Cassell abut the identity of the customer, Pureve. The next day, Vickers agreed with the selling securities firms to rescind the AE trades.

The matter unraveled quickly after that. On Nov. 5, Cassell informed Vickers that Collier owned Pureve and that the two had arranged to divide the profits. On Nov. 6, Collier tendered his resignation to Morgan Grenfell and disclosed his trading in Cadbury as well as in AE.

Also on Nov. 6, before it was publicly revealed that General Cinema had announced a program to purchase Cadbury shares, Collier instructed Cassell to sell the Cadbury call options. On Nov. 10, they sold the options, resulting in the $21,741 loss.