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SEC Files Insider Trading Lawsuit Against Frank T. Poerio, Jr.

In May 2024, the U.S. Securities and Exchange Commission (SEC) filed a civil lawsuit against Frank T. Poerio, Jr. for engaging in insider trading involving the securities of Dick’s Sporting Goods, Inc. The SEC’s complaint, filed in the Western District of Pennsylvania, accuses Poerio of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by illegally profiting from non-public information regarding the company’s quarterly revenue between 2019 and 2021.

Insider Trading – Tipper / Tippee Relationship

Key Allegations:

  1. Insider Access to Nonpublic Information:
    • Poerio had a close relationship with an individual (“Individual A”) who worked at Dick’s Sporting Goods and had access to non-public revenue figures through internal databases.
    • Individual A, whose role involved sales and performance analytics, was privy to real-time sales data and upcoming earnings figures for the company.
  2. Breach of Trust:
    • Despite being aware that trading based on insider information was illegal, Poerio allegedly persuaded Individual A to share confidential company performance updates.
    • Although Individual A sometimes resisted, Poerio still obtained and used confidential information about the company’s financial health to make his trades.
  3. Trading Activity:
    • Poerio executed significant trades in Dick’s Sporting Goods stock and options just before the company’s quarterly earnings announcements. His trades were timed to capitalize on increases in stock price after the earnings releases.
    • From November 2019 to May 2021, Poerio purchased over 59,000 shares of Dick’s Sporting Goods common stock, 1,362 call options, and shorted 436 put options, netting a profit of $823,367.
  4. Notable Trading Incidents:
    • In August 2020, leading up to the company’s second-quarter earnings report, Poerio increased his position in the company significantly, purchasing around $637,450 in stocks and options. After Dick’s announced earnings that exceeded expectations by 250%, Poerio sold his holdings, making a profit of $180,221.
    • Similarly, in November 2020, ahead of another earnings report, Poerio purchased over $580,000 worth of Dick’s Sporting Goods shares. Following the positive earnings release, his holdings increased in value, earning him $105,038 in profits.

The SEC is seeking:

  • A permanent injunction to prevent Poerio from committing future violations.
  • Disgorgement of all illicit profits, along with prejudgment interest.
  • The imposition of a civil monetary penalty.

The SEC argues that without court intervention, Poerio may continue engaging in similar illegal practices.

Conclusion:

This case serves as a strong reminder of the SEC’s focus on ensuring fair and transparent markets by cracking down on insider trading. The outcome of this lawsuit could lead to significant financial penalties for Poerio and send a message to others who might consider using confidential information for personal gain.

About Michael Rasmussen

Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.  

Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include: 

  • Investment Adviser Compliance Essential for Chief Compliance Officers 
  • Foundations of Investment Adviser Compliance 
  • What is a “Security”? 
  • Investment Adviser Marketing Rule 
  • Regulation A – Exemption from Registration 
  • Regulation Crowdfunding – Exemption from Registration 
  • Regulation D – Exemption from Registration 

Michael can also be found on LinkedIn.

Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.