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Yoomi Lee | Bloomberg Law SEC v. Marovitz No. 11-CV-05259 (N.D. Ill. filed Aug. 3, 2011); SEC Litigation Release No. LR-22059 (Aug. 3, 2011) The Securities and Exchange Commission (SEC) settled charges against William A. Marovitz for allegedly trading Playboy Enterprises, Inc. (Playboy) securities while in possession of material, non-public information regarding Iconix Brand Group, Inc.'s (Iconix) impending acquisition of Playboy. The SEC charged Marovitz, the spouse of Playboy's former CEO Christie Hefner, with violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 (Securities Act). Christie Hefner is the daughter of Playboy's founder, Hugh Hefner. Without admitting or denying the findings, Marovitz agreed to a permanent injunction from future violations and consented to pay $168,352 in disgorgement, prejudgment interest, and civil penalities. Marovitz's Misconduct According to the complaint, between 2004 and 2009, Marovitz misappropriated material, non-public information from his wife and traded Playboy securities despite his wife's clear instructions not to do so. Moreover, Playboy's general counsel allegedly also warned Marovitz about the "serious implications" of trading Playboy stocks, and told him that the SEC's rules governing insider trading applied to him as well. During this time, Iconix and Playboy were engaged in discussions regarding a possible acquisition of Playboy. On November 10, 2009, two days before news of the acquisition was reported, Marovitz bought 9,000 shares of Playboy stocks through his brokerage account. Once the news was released, Playboy stocks increased by 42 percent and Marovitz made a profit of over $11,000. Further, after Marovitz found out from his wife that Iconix was ending its efforts to acquire Playboy, he sold his Playboy shares based on this material non-public information. Playboy stocks decreased by 10 percent once the news reported that the potential acquisition was over, and Marovitz avoided any losses. The SEC further claimed that on three separate occasions, Marovitz purportedly traded ahead of Playboy's negative earnings announcements and stock offerings while in possession of material non-public information that he misappropriated from his wife. As a result, the SEC charged Marovitz with violating Exchange Act Section 10(b) and Rule 10b-5 thereunder, and Securities Act Section 17(a). The SEC alleged that Marovitz (1) owed a duty of trust and confidence to Hefner as her spouse; and (2) breached the fiduciary duties of trust and confidence, which he owed to Hefner and Playboy. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.
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