He Was Told Not to Trade. The SEC Says He Bought 11,455 Shares Anyway
A confidential conversation about Kimball International’s possible acquisition moved through a family. The SEC found that Gregory Dale Smith turned it into a $59,710.85 trading profit.
The evidence in five points
- The SEC found that confidential information about HNI’s proposed acquisition of Kimball traveled from a Kimball executive to the executive’s spouse, then to Gregory Dale Smith, the spouse’s brother.
- Smith was told that the information was non-public and was specifically instructed not to trade, according to the order.
- From February 10 through February 27, 2023, Smith bought 11,455 Kimball shares for $81,256.30.
- Kimball’s stock closed 84.35% higher on the March 8 announcement date. The SEC attributed $59,710.85 in profit to Smith’s newly purchased shares.
- A settled SEC order requires disgorgement, interest and a matching civil penalty totaling $134,150.15. Smith consented without admitting the findings, subject to specific exceptions in the order.
This was not a story about an executive placing the trade. It was about confidential corporate information crossing a family boundary.
A warning inside a family conversation
A confidential conversation about what a takeover might mean for a family and its community came with an explicit boundary: do not trade.
According to the SEC, a senior Kimball executive learned around February 8, 2023, that negotiations with HNI were approaching completion. The executive shared the potential transaction with a spouse in confidence so they could discuss possible effects on themselves and their community. That spouse, identified only as Smith’s brother in the order, soon told Smith that Kimball would likely be acquired.
“Brother told Smith that this information was non-public and specifically instructed Smith not to trade on it.” SEC order, paragraph 7
The Commission found that Smith acknowledged the information was confidential. It also found that he knew, or was reckless in not knowing, that his brother had learned it through a marriage to a senior Kimball executive.
Between February 10 and February 27, Smith bought 11,455 Kimball shares at prices ranging from $6.99 to $7.15. His total cost was $81,256.30.
Figures are taken from the SEC order. The 84.35% figure describes the March 8, 2023 closing price compared with the previous day’s close.
How the confidential information moved
The SEC’s account turns on a chain of trust. Each step mattered because insider trading law can reach someone who is not the corporate executive who originally possessed the information.
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Kimball and HNI negotiated a potential acquisition.
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A senior Kimball executive learned of the potential transaction and told a spouse in confidence.
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The spouse told Smith that Kimball would likely be acquired, identified the information as non-public and instructed him not to trade.
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Smith purchased 11,455 Kimball shares for $81,256.30.
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HNI and Kimball announced their definitive acquisition agreement before the market opened. Kimball closed at $12.37.
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Smith sold the 11,455 shares, together with roughly 6,500 Kimball shares he had owned before learning of the transaction.
The legal mechanism was misappropriation
- Material information: A likely corporate acquisition was information a reasonable investor could consider important.
- Non-public information: The transaction had not been announced when Smith bought the shares.
- A duty of confidence: The SEC based that duty on the brothers’ close relationship, their history of sharing confidences, the explicit warning and Smith’s acknowledgment.
- Trading in breach of that duty: The Commission found that Smith bought Kimball shares using the information before the public announcement.
The order concludes that this conduct violated Section 10(b) of the Securities Exchange Act and Rule 10b-5, which prohibit fraudulent conduct connected to securities trading. The SEC described Smith as retired and noted that he had never held securities licenses or registered with the Commission. Professional status was not the basis of the duty identified in the order. The personal relationship and the confidential disclosure were.
The announcement changed the value of the trade
Before the market opened on March 8, 2023, HNI and Kimball announced a definitive agreement under which HNI would acquire Kimball for cash and stock. Kimball shares closed that day at $12.37, approximately 84.35% above the prior day’s closing price.
Smith began selling on March 13 and completed the sales by May 8. The SEC calculated $59,710.85 in profits from the 11,455 shares purchased after the disclosure. The order separately notes that Smith also sold roughly 6,500 shares he had owned before learning about the merger. It does not attribute the stated illegal profit to those pre-existing shares.
HNI completed its acquisition of Kimball on June 1, 2023. The supplied order does not describe whether the family’s concerns about the transaction or its effects on the community ultimately materialized.
The settlement takes back the profit and adds a matching penalty
The SEC ordered Smith to cease and desist from current or future violations of Section 10(b) and Rule 10b-5. It also ordered three payments within 30 days.
| Ordered payment | Purpose | Amount |
|---|---|---|
| Disgorgement | Return of net profits identified by the SEC | $59,710.85 |
| Prejudgment interest | Interest on the disgorgement amount | $14,728.45 |
| Civil penalty | Additional monetary sanction | $59,710.85 |
| Total listed amounts | Sum of the three ordered payments | $134,150.15 |
The order says the disgorgement does not exceed Smith’s net profits. It directs the money, including the disgorgement and interest, to the general fund of the United States Treasury rather than establishing a distribution to investors. Additional interest can accrue if payment is late.
A finding, a settlement and a limited admission
The language of the resolution matters. Smith submitted an offer of settlement, which the Commission accepted. He consented to the order without admitting its findings, except that he admitted the SEC’s jurisdiction over him and the proceeding’s subject matter.
Section V creates another narrow exception. Solely for determining whether debts are dischargeable in bankruptcy, the order states that its findings are true and admitted by Smith. The debts connected to the securities-law violation are treated as falling within the relevant bankruptcy exception.
This was an administrative cease-and-desist proceeding. The document does not describe a criminal conviction or identify any parallel criminal case.
Who the order does not accuse
Kimball and HNI appear as the companies involved in the acquisition, not as respondents. The order does not accuse either company of wrongdoing in this matter. It also makes no finding that the unnamed Kimball executive or Smith’s brother traded on the information.
The supplied record contains no response from Kimball or HNI, and it does not say that either company was asked to respond. Smith is the only respondent named in the proceeding.
The cost that cannot be reduced to a stock chart
The order does not identify a particular investor who lost money because of Smith’s trades, nor does it calculate broader market harm. Claims about specific victims or losses would go beyond this record.
What the order does document is a private confidence converted into a market advantage. The original conversation concerned uncertainty about a corporate acquisition and its possible effects on a family and community. The SEC found that information shared for that purpose became the basis for more than $81,000 in stock purchases, despite a direct instruction not to trade.
The broader market issue is unequal access. Public securities markets depend on investors trading from information available to the market, not confidential acquisition plans obtained through trusted personal relationships. The enforcement action treats the breach of that relationship as part of the securities violation, not merely a private family dispute.
What the order leaves unanswered
- It does not explain how regulators detected the trading or began the investigation.
- It does not provide Smith’s factual account beyond his settlement posture.
- It does not quantify losses to identifiable investors or describe a plan to compensate them.
- It does not document whether the acquisition produced the family or community effects that prompted the original conversation.
The decisive sequence in the SEC’s account is compact: confidential acquisition information crossed from an executive to a spouse, then to a brother who was told not to trade. Purchases followed within days. When the deal became public, the share price surged.
The enforcement action shows how a corporate secret can become tradable currency far beyond the boardroom. In this case, the Commission placed a $134,150.15 financial consequence on a $59,710.85 profit and the family confidence it found had been misused.
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