SEC Charges Former Tallgrass Energy Board Member Roy Cook and Associates with Insider Trading

The Securities and Exchange Commission (SEC) has announced insider trading charges against Roy Cook, a former board member of Tallgrass Energy LP, and four associates. The charges stem from their alleged trading on material nonpublic information ahead of a public announcement of Blackstone Infrastructure Partners' acquisition offer for Tallgrass. The SEC also accuses Cook of failing to file required disclosure reports related to securities transactions by family trusts. All five defendants have agreed to settlements totaling over $2.2 million in disgorgement, prejudgment interest, and civil penalties.

According to the SEC's complaint, Cook became aware in late July 2019 that Blackstone, having acquired 44 percent of Tallgrass's public shares earlier that year, intended to make a public offer for the remaining publicly traded shares. Subsequently, Cook allegedly shared this confidential information with friends Jeffrey Natrop, Peter Renner, James Rudolph, and Peter Williams, who all engaged in trading Tallgrass securities prior to the public announcement on August 27, 2019.

Natrop and Renner, identified as friends and business associates of Cook, purchased Tallgrass call options in August 2019, resulting in illicit profits of $43,862 and $13,520, respectively. Rudolph, who allegedly received the tip while celebrating his birthday with Cook in the Bahamas, made a Tallgrass stock purchase on August 6, 2019, yielding illicit profits of $31,035. Williams, a long-time friend and personal accountant of Cook, purchased call options in August 2019, leading to illicit profits of $463,000.

Following the announcement on August 27, which caused a 36 percent surge in Tallgrass shares, Cook assumed the role of chair of a Tallgrass Conflicts Committee responsible for assessing Blackstone's offer and negotiating final terms. During this period, Cook allegedly continued sharing material nonpublic information with Williams, who traded on this information in a Cook family trust account, generating illicit profits of $88,800.

The SEC complaint also alleges that on December 10, 2019, while vacationing in Chile, Cook provided Williams with more material nonpublic information about the negotiations. Williams subsequently purchased more call options in his personal account, resulting in additional illicit profits of $61,525.

Mark Cave, Associate Director of the SEC’s Division of Enforcement, emphasized the SEC's commitment to holding accountable individuals who misuse inside information for personal gain, particularly those in positions of trust such as board members.

In response to the charges, Cook has agreed to pay a civil penalty of $801,742 and disgorge his illicit trading profits, along with prejudgment interest. Cook has also accepted an officer-and-director bar. The four associates, without admitting or denying the allegations, have agreed to pay civil penalties equivalent to their illicit trading profits and disgorge those profits, along with prejudgment interest.

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