SEC files complaint against James C. Cope, Esq. for insider trading

The Securities and Exchange Commission has filed a complaint against James C. Cope for insider trading.  Cope, a Tennessee attorney and former board member of Pinnacle Financial Partners (PNFP), allegedly used his board position to obtain a huge financial gain when PNFP acquired Avenue Financial Holdings (AVNU).

The SEC’s complaint alleges that in 2006, PNFB purchased Cavalry Bancorp.  As part of that purchase, two members of Cavalry’s board joined the board of PNFP.  Cope was one of the two and remained a director until April 2016.  Not only was Cope a board member, but also he was the chairman of the Human Resources subcommittee of PNFP’s board.  Per the board structure, all Subcommittee chairmen were part of the Executive Committee.  The Executive Committee met on a monthly basis and had a more intimate knowledge of the company’s future plans than regular board members.

The SEC’s complaint further alleges that in the Fall of 2015, Cope attended a special training session regarding insider trading.  The training session occurred at a local restaurant and even included a power point presentation.  By January of 2016 Cope received, read and signed an Insider Trading Statement.  There appeared to be no reason for any confusion regarding insider trading by the members of the board of PNFP.

In the fall of 2016 PNFP held a board retreat at which it began exploring options for acquisition.  Cope attended this retreat.  Acquisition was the primary growth tool for PNFP.  Keefe, Bruyette and Woods is an investment banking firm that researched acquisition options for PNFP and found AVNU to be a very attractive target as it was an “in-market” firm.  In-market meant that a merger would enable PNFP to acquire the bank and consolidate many branches in the same market as PNFP, thus maximizing the investment.

In early December 2015, at an Executive Committee meeting attended by Cope, PNFP’s President and CEO briefed the Executive Committee members regarding the possible and on-going acquisition talks between the two banks.  As December wore on, the talks intensified and PNFP made an informal offer to AVNU.  The offer was $19.00 a share, a $5.34 premium over that day’s share price.

The SEC alleges that at the January 5, 2016 Executive Committee meeting, the informal offer was discussed.  The discussion the merger occupied a full hour of the 2-hour meeting.  As the discussions were going so well, board members were reminded of the insider trading policy.  Many of the board members believed that they were barred from purchasing AVNU stock.  However, the SEC alleges that Cope made his first purchase of ANVU stock during that meeting.  He initiated more trades throughout the day.  By 2:00 p.m. that very day he owned 6179 AVNU shares.  On January 11, 2016, he purchased 4,000 more shares.  All shares were purchased at an average price of $13.67.  The merger was publicly announced on January 28, 2016.  On January 29th, the price of AVNU was $19.24 per share.  Per the complaint filed by the SEC, Cope “obtained unrealized profits of not less than $56,302.”

The SEC’s complaint seeks to have Cope barred from ever trading again, as well as a fine in the amount of the ill-gotten gains he obtained from his alleged disregard of insider trading laws.

You can read the entire SEC Complaint at the following link: James C. Cope, Esq..  If you have questions regarding compliance with insider trading laws and prohibitions, then please contact Tomlinson & Shapiro at (312) 715-8770.

Michael Shapiro
(312) 715-8770