Evening star., 1961-11-14
SEC Suspends
Broker Acting
On Inside
BY MIRIAM OTTENBERG
Star Staff Writer


Commission has broadened its
Interpretation of stock frauds
to include the activities of a
New York broker who used in
side information of a dividend
cut to sell 1000 shares of air.
craft stock before its price
dropped.
In an unprecedented move to
protect the investing public. the
SEC yesterday suspended Rob-
ert M. Gintel from Stock Ex-
change membership for 20 days,
IMr. Gintel is a partner in the
New York brokerage firm OF
Cady, Roberts and Co.
SEC Chairman William l.
Cary, who wrote the commits
sion opinion, called the case
zone of signal Importance m our
administration of the Federal
securities acts"
The Events
The opinion reviewed this
chain of events in explaining
why the SEC found that Mr..
Gintel had violated the anti
fraud provisions Of the securi-
ties acts:
On November "a, 1859, the
press was full of the news that
the Curtiss-Wright Corp. was
developing a new type of in
ternal combustion engine. Stock
in the company started going
up in the wake of the news and
the next morning hit a new
high for the year.
On November 25. while the
stock was still going UP, the
Curtiss-Wright directors met
and decided to reduce the divi-
dend for the fourth quarter
from 621a cents a share to S71a
cents a share.
At approximately II am,
the board of directors author
lied announcement Of its divi-
dend action by telegram to the
New York Stock Exchange. APP
parently through delays in
transmission or inadvertence,
the news did not appear on the
Dow Jones ticker tape until
l11:48 am. and was not de-
Ilivered to the Stock exchange
until 1929 pm.
Informs Office
Meanwhile, the late j. Chez
yer Cowdin, a member of the
CurtisS-Wright board as well
as a representative Of Mr.. Gin
tells firm, had called his office
during a recess of the Curtiss-
Wright meeting and left mes
sage for Mr.. Gintel that the
dividend would be cut. At this
point, Mr.. Cowdin probably as
sumed the dividend action had
been publicly announced.
AS soon as he got the infor-
nation, Mr.. Gintel Immediately
placed orders to sell 1000
shares of the Curtiss-W Wright
stock-of which $50 were al
located to Mr.. Gintels wife.
When Mr.. Gintel's orders to
sell we're executed, the stock
was selling at 40 and frac-
ton. Thereafter. when the news
of the dividend cut became
public, the Stock Exchange had
to suspend trading in CurtisS-
Wright for about two hours be-
cause of the flood of sell orders.
When trading resumed, the
stock had dropped to 361z and
closed at 347s.
Cites Court Rulings
The SEC held that Mr.. Gin
tel, because of his inside in
formation, was in the same
position as a company officer
or "insider" and was barred
from selling the securities af-
fected by the information. The
SEC pointed out that both the
commission and the courts
have consistently ruled that
insiders" not use information
known to them because of their
position for their personal ben
eft.
The commission cited the
inherent unfairness involved"
when a person takes advantage
of inside information which he
knows is not available to those
with whom he is dealing.
The SEC rejected Mr.. Gin
tells argument that an insiders
responsibility was limited to
existing stockholders and that
he had no special duties when
securities are sold to nom
stockholders. The commission
said that approach ignores the
plight of the buying public
wholly unprotected from the
misuse of special information"