Former NASDAQ MD sentenced on insider trading charges

Donald Johnson, 57, had pleaded guilty in May this year to one count of securities fraud, admitting that from 2006 to 2009, he purchased and sold stock in NASDAQ-listed companies based on material, non-public information and inside information he obtained through his position as an executive at NASDAQ.

He was sentenced by US District Judge Anthony Trenga in the Eastern District of Virginia.
"Johnson's insider status at one of our nation's largest securities exchanges gave him access to highly sensitive information, which allowed him to anticipate the rise and fall of certain stocks," said Assistant Attorney General Lanny Breuer.

"Armed with this insider information... Johnson pocketed hundreds of thousands of dollars. But he did it by exploiting his trusted position to gain an unfair – and illegal – advantage in the market".

Johnson made USD 755,066 in illicit profits through inside information he had on various companies and has been ordered to forfeit the amount.

According to court documents, Johnson was managing director on NASDAQ's market intelligence desk in New York from August 2006 to September 2009.

The desk provides trading analysis and market information to companies that list on NASDAQ.

Johnson admitted that he repeatedly used company information related to earnings announcements and regulatory approvals to purchase or sell short stock in various NASDAQ- listed firms shortly before the information was made public.

In order to conceal his illegal trading, Johnson executed these trades in a brokerage account in his wife's name, which he failed to disclose to NASDAQ in violation of its rules.
Johnson admitted in his plea that he made illegal purchases and sales of stock in NASDAQ-listed companies on at least eight different occasions.

The Securities and Exchange Commission has filed a related civil enforcement action against Johnson in New York

Assistant Attorney Breuer said: "Insider trading is an insidious crime that threatens the integrity of our financial markets, especially when the illegal trades are made by a trusted securities exchange official".

Breuer said Johnson used his position at NASDAQ to make quick profits from sensitive information companies provided him.

"He learned what every other trader on Wall Street must now realise: We're watching, and when you’re caught you’ll face serious time in prison," she said.

The market intelligence desk, Johnson was MD of, provides trading analysis and market information to the companies that list on NASDAQ.

According to court documents, Johnson monitored the stock of companies traded on NASDAQ and offered NASDAQ-listed companies information and analyses concerning trading in their own stock.

To enable him to perform these services, NASDAQ-listed companies routinely entrusted Johnson with material, non-public information about their company, including advance notice of announcements concerning earnings, regulatory approvals and personnel changes.

Johnson repeatedly used this information to purchase or sell short stock in various NASDAQ-listed companies shortly before the information was made public. He would then generate substantial gains by reversing those positions soon after the announcement.