Yesterday, the SEC filed the latest in its long line of "Familial Betrayal" insider trading cases that I have attempted to chronicle here. The case filed against James Balchan is yet another husband-betraying-wife case. After a careful review, I am placing it in the Guarded category ("Counseling Required") on Enforcement Action's Familial Betrayal Advisory System.

In short, the SEC alleges that Balchan's wife was a partner at a large law firm. Balchan and his wife were scheduled to attend a "wine and dine" event in April 2011 in honor of National Semiconductor's general counsel, but his wife learned that the GC would not be able to attend the event because he was working on the company's impending acquisition. According to the SEC, the GC sought his wife's law firm's advice in dealing with certain regulatory issues arising from the deal. The GC also informed the law firm that, in light of the acquisition, he would be unable to attend the event that coming weekend. 

Balchan's wife allegedly shared the information about the acquisition with Balchan in confidence in the context of discussing their weekend plans. The SEC claims that the very next morning, Balchan began purchasing thousands of National Semiconductor shares, which he ultimately sold for a profit of nearly $30,000.

Based on our Familial Betrayal Advisory System precedents, this case belongs in the Guarded category, as it is most comparable to cases such as SEC v. Macdonald. The Balchan case simply does not have the the level of outrage required to rise to the level of Elevated (”Clothes Thrown Out Window”). Cf. SEC v. Edelman ("Elevated" case involving express caution from girlfriend not to trade, a supposed agreement not to do so, and a post-betrayal break-up).

In Macdonald, and now in Balchan, the betrayal merely involved alleged "trading behind the wife's back," with no express cautions from the wife against trading or promises from the husband to refrain from trading. Plus, Balchan's wife was not sued.

To recap, the full list of FBAS cases now looks like this:

Severe ("Hell Hath No Fury"): SEC v. DevlinHigh ("Restraining Order"): SEC v. StummerElevated ("Clothes Thrown Out the Window"): SEC v. EdelmanGuarded ("Counseling Required"): SEC v. Goodman; SEC v. Rocklage, SEC v. Macdonald; SEC v. BalchanLow ("Someday We'll Laugh About It"): SEC v. Melton, SEC v. Gangavarapu

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