YTB and the SEC: More Problems?
- Apr 09, 2009
- By: George Dooley
- TravelAgentCentral
The ongoing controversy over YTB took a new twist with an allegation that YTB’s release of information earlier this week may be in violation of Securities and Exchange Commission (SEC) rules on insider trading. John Frenaye, a respected agent and online blogger raised questions on his blog MLMs and Travel: A Bad Mix. YTB International is a publicly owned company and subject to SEC rules.
Frenaye questions center on YTB’s statement, quoted here in full):
“On April 6, 2009, YTB International, Inc. (the “Company”) circulated an internal communication to its employees and certain members of its sales force indicating that the Company reached a tentative settlement agreement with the State of California as of Monday, April 6, 2009 in connection with the civil action filed on August 4, 2008 against the Company and certain executive officers of the Company in the Superior Court of California, County of Los Angeles, by the California Attorney General.”
YTB reported this to the SEC on an 8K form.
Frenaye questions if the original statement was made by YTB to ward off alleged departures of YTB directors to a competing multilevel marketing firm. “Many have opined that the release of the memo was an effort to hold off the departing directors— there are reportedly 15 to 20 more departing in the next week to 10 days," he said. "It is quite possible. However, it may have been one of their biggest 'whoops' moves since it may technically be a violation of the Security Exchange Commission's regulations on insider trading.
“By releasing the memo of a tentative settlement only to 'certain' individuals a full 24 hours prior to announcing it to the public, YTB has dealt insider information. And if you look at the volume of their stock, you can see that there was significant action on it. The volume was nearly five times normal volume,” Frenaye reports.
“So, lets say that one of the Travel Pros at YTB got a hold of this information at 3:47 p.m. on Monday, April 6 when the stock was trading at 16 cents. Feeling that the stock could only go up on the public release of this news, a Travel Pro buys 20,000 shares for $3,200. Let's say that the Travel Pro passes the word onto everyone he knows who also buys up the shares because YTB has not released the information yet. It might draw five times the volume on Tuesday, April 7. Late in the day on April 7 at 3:17 p.m., YTB finally releases the information that they distributed in the memo 24 hours prior. Now that the information is public, the stock predictably went up. Now just suppose that a Travel Pro sold his 20,000 shares on April 8 when the stock was trading at 34 cents. He would walk out with $6,800. That is a 112 percebt gain in slightly more than 24 hours. And if the stock was held, it is likely to increase some more this week as the mystery surrounding the settlement fuels the market. To me, this seems like insider trading.”
Frenaye then quotes from SEC rules and urges readers to visit the SEC’s website.
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.
Examples of insider trading cases that have been brought by the SEC are cases against:
* Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments
* Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information
* Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded
* Government employees who learned of such information because of their employment by the government
* Other persons who misappropriated, and took advantage of, confidential information from their employers.
Frenaye, a long standing critic of multi-level marketing firms, ends by noting that the SEC “even has a 'bounty program' which offers cash rewards for tips that lead to convictions of insider trading," he said. "And it is even very simple for anyone to file a complaint right on their site. Technology is a great thing!”
Repeated attempts to contact YTB have failed and it is Travel Agent's understanding that YTB executives are embargoed from speaking with reporters. Travel agents are urged to visit YTB’s web site (www.ytb.com) and to read YTB’s Annual Report and filings with the SEC that are posted online. Visit (http://notravelmlms.blogspot.com) and www.ytb.com for additional details.
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Comments 1-10 of 14
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JDub (APRIL 25, 2009)
You guys just don't get it. If you want to continue being a brick and mortar travel agency that sets up personal trips for your clients and knows everything about the travel agency, then please continue doing so. Why don't you allow people to make some commission off of travel being booked ONLINE? It would be booked ONLINE anyway (not with you), so some people are just cashing in on that idea. The RTA's are NOT full-fledged travel experts like you guys are...they don't have to be, for crying out loud. All they need to do is have their website, and YTB takes care of the rest. I realize you guys are angry at YTB because they are one more entity taking your business, but realize that that business would not be going to you anyway. And if at this point you throw out the argument that some RTA's claim to be travel agents even though they know next to nothing about the travel industry...I would agree with you that that is fishy. Yet, that is not all RTA's, and that is not the stance of YTB.
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s blake (APRIL 24, 2009)
Mr Frenaye is Barry Diller paying you or
are you just another disgruntled travel
store owner who has nothing better to do that bass a great and growing homebased business... -
Charles (APRIL 20, 2009)
Robert,
If you think for one moment that you are legitimately learning how to be a career travel professional by taking any course offered by YTB, or anyone else for that matter without paying your dues on the front lines of a real travel agency (corporate or leisure), you are not only sadly mistaken, but a fool. You see, those of us who still do this, do it because we have done it for years and loved it even after most all of the benefits and commissions where taken away (except preferred suppliers), but people like me have a minimum of $1Million dollar insurance policies to back up the quality of our work. Do you? Do you even know what the new TSA secure flight standards are coming up this year? (I'm sure you will Google it in your reply) Can you even do an exchange transaction, or do your own international fare construction beyond what your "computer" prices for you? Do you know what XF stands for on a linear fare construction? Get serious, or go away. -
Jane Smith (APRIL 15, 2009)
"I now own my own home business and Im traveling at a discounted rate" That is the crux of the problem. YTB thinks they are owed the discount by simply paying with a credit card. Instant travel agent. Instant discounts. That is why we are so upset. We, TTA's are not in it for the discounts. As for travel agent university cupcake courses. My dog could pass them. Try taking the TAP test. AND IF you are serious about travel join a legit host. Check out OSSN, NACTA or PATH to find one. YTB will never be respected. So, why would you associate yourself with them? If you want to have a travel business align yourself with someone other than YTB.
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Chris (APRIL 13, 2009)
I find it interesting that no one is denying that YTB sent an email to their insiders providing them with insider information about a potential settlement of the SEC's lawsuit which could have shut the company down. No one is denying that the insiders had the information before the public. No one is denying that there was many TIMEs the usual volume of the stock traded. That my friends is insider trading.
You might be such a YTB zealot that you feel they are above the law, but the rest of us feel YTB should be accountable for their acctions.
Can you imagine how pissed you would be if you sold your stock to someone that had recieved the email before you were told about it?
This idea that YTB is somehow above the law and those pesky insider trading laws don't apply to your god "Coach" is just disgusting.... -
Robert (APRIL 13, 2009)
If YTB broke any trading rules it will soon come out. As far as being a sore to the travel industry I disagree. I joined YTB several months ago and am currently studying hard at our travel university learning to be an agent. I now own my own home business and Im traveling at a discounted rate and helping my friends and family book trips of a lifetime. Most of us maybe new to the industry but give us a few years and we'll be the trained professionals.
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JJ (APRIL 11, 2009)
It never ceases to amaze me how those in YTB lack basic grammar, spelling and reading comprehension. It is w-a-s-t-e-d not waisted. Where do they get these people? JKenney-Not only do you need to get a life but a GED.
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mewee (APRIL 11, 2009)
Its good to see such stunning defence of a company even in the face of such a clear breach of SEC rules. Even I knew about the outcome before it was made public. Look a the volume a lot of people did. Be a MLM dreamer if you want but come on how can you defend this??
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James Patterson (APRIL 10, 2009)
As for those complaining "fair and balanced," maybe if YTB actually returned phone calls then their side of the story could be published. But apparently they are hiding. And this is not a "rumor," it is a certified travel pro's analysis of the scenario. It's his opinion, he "questions" the scenario, not stating it as truth.
BTW, J Kenney, we'll grow up when you learn to spell better. -
Ron (APRIL 10, 2009)
YTB RTA's have been getting away for far too long making fraudulent and anti-competitive claims like they could beat everyone else on travel prices.
Such empty promises were made to dupe people into signing up and paying the ongoing fees in order to provide commissions to a few at the top of the pyramid. Travel has been just an excuse to operate the scheme.
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