On Friday, the Securities and Exchange Commission announced that it charged a group of golfing buddies, who made more than a half-million dollars, with trading on inside information.

In a complaint filed in federal court in Boston, the SEC alleges that Eric McPhail repeatedly provided non-public information about American Superconductor to six others, most fellow competitive amateur golfers.

McPhail’s source for the information that netted $554,000 in illegal profits to the group, was an American Superconductor executive who belonged to the same country club as McPhail.

“Whether the tips are passed on the golf course, in a bar, or elsewhere, the SEC will continue to track down those who seek an unfair advantage trading stocks,” said Paul G. Levenson, director of the SEC’s Boston Regional Office.

According to the complaint, the tips actually weren’t whispered on the golf course, but passed from one golfer to the next via email.

From July 2009 through April 2011, the American Superconductor executive told McPhail about his company’s expected earnings, contracts, and other major pending corporate developments, trusting that McPhail would keep the information confidential.

Instead, McPhail emailed his friends to feed them information about the energy technology company and fed it to his friends.

According to the SEC’s complaint, in April 2011, McPhail tipped two of his buddies a few days before American Superconductor announced that it expected fourth-quarter and fiscal year-end results to be weaker due to a deteriorating relationship with its primary customer, China-based Sinovel Wind Group Co., Ltd. The two friends, in turn, used the information to place bets, through option contracts, that the company’s stock price would decline.

When American Superconductor made the announcement, its stock price fell 42 percent and as a result of this one tip alone, one friend made profits and avoided losses of $278,289, while the other made profits of $191,521.

The complaint charges that McPhail and his fellow golfers violated federal antifraud laws and the SEC’s antifraud rule. The SEC seeks to have them be enjoined, return their allegedly ill-gotten gains with interest, and pay financial penalties of up to three-times their gains.

Some members of the group agreed to settle the SEC’s charges, without admitting or denying the allegations, by consenting to the entry of judgments permanently enjoining them from violating the relevant securities laws.

Source: Securities and Exchange Commission