Th Securities and Exchange Commission has charged a former analyst at a Boston-based investment bank with illegally tipping a friend with confidential information regarding clients involved in upcoming mergers and acquisitions.

The SEC alleges that Jauyo Lee, who worked in the San Francisco, CA, office of Leerink Swann, harvested non-public information regarding the deals from co-workers involved with those clients and reviewed "various internal documents about the transactions," tipping Victor Chen with such information.

Chen then “traded heavily” on the basis of the non-public details which Lee “had a duty to protect,” making over $600,000 in illicit profits - a 237 per cent return on his initial investment, according to a statement by the US regulator.

“Lee worked in an industry where safeguarding non-public information is essential, yet he exploited his access to confidential merger and acquisition details to give his friend an unfair trading advantage,” said Merri Jo Gillette, director of the SEC’s Chicago, IL, regional office.

According to the SEC’s complaint filed in US District Court for the Northern District of California, Lee was first privy to information about Leerink’s client Syneron Medical, which was negotiating an acquisition of Candela Corporation in 2009. He then learnt that Leerink’s client, Somanetics Corporation, was in the process of being acquired by Covidien in 2010.

In the days leading up to the public announcements of each of these deals, Chen made “sizeable purchases” of stock and call options in Candela and Somanetics, making “unusual trades” in the securities of each of these acquisition targets.

The SEC alleges that Lee and Chen violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, financial penalties, and permanent injunctions against Lee and Chen.