Douglas Elliman under Investigation for Insider Trading

A recent development has seen Douglas Elliman come under the radar of the Financial Industry Regulatory Authority (FINRA). The regulatory agency has initiated a probe into trading activities surrounding a failed takeover attempt of the New York-based brokerage by Anywhere Real Estate. This move follows a surge in Elliman’s stock price by over 30 percent after news of Anywhere’s offer broke on May 23, as reported by Reuters.

The investigation is focused on identifying individuals within Elliman who may have had prior knowledge of Anywhere’s bid before it was made public. Anywhere Real Estate, the parent company of well-known real estate firms such as Corcoran, Sotheby’s International Realty, Coldwell Banker, and Century 21, initially proposed a $5-per-share deal in March. Subsequently, the offer was withdrawn in April, only to be reintroduced with revisions towards the end of May. However, negotiations between the two parties ultimately fell through by early June.

In letters dated June and August, FINRA’s market abuse division, while indicating that the probe does not imply any illicit activities, requested a detailed timeline of events from Elliman. They have also asked for board minutes, trading policies, and a list of individuals privy to the takeover offer. Despite conveying that the review is part of standard procedure, FINRA sought information on stock transactions leading up to the public disclosure of the bid.

It came to light that Elliman board member Patrick Bartels sought approval on May 7 to purchase $250,000 worth of company shares, coinciding with the same day Anywhere’s advisors hinted at a revised proposal being in the works. While the purchase was later reported in an SEC filing, Bartels has yet to provide any public statements regarding the matter. Both Elliman and FINRA have opted to refrain from issuing public comments on the issue, while Anywhere has not responded to requests for statements.

This investigation adds to a series of challenges Elliman has faced over the past year, including recurring financial losses, a previous activist shareholder campaign, and a string of sudden changes in high-level executives. Notwithstanding the failed talks with Elliman, Anywhere Real Estate recently finalized a substantial acquisition deal with Compass. The all-stock merger, announced within the week, values Anywhere at $1.6 billion, with Compass shareholders set to possess a 78 percent stake in the combined entity following the absorption of Anywhere’s $2.6 billion debt.