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NEW YORK (Reuters) – The Securities and Exchange Commission charged a Maryland business consultant and his uncle with insider trading, saying they used codes from the 1987 movie Wall Street to try to hide their scheme.

Baltimore-based consultant Brett A. Cohen received coded e-mails from a fraternity brother about two biotechnology companies and passed the information to an uncle, David V. Myers, of Cleveland, Ohio who traded on the tip, the SEC said.

The fraternity brother, who was not named, received the information from his brother, a patent agent for San Diego-based Sequenom Inc(SQNM.O), a maker of genetic analysis products, the SEC said.

In one of the e-mails sent to Cohen, the patent agent's brother asked if there was any word related to "Blu H@rsesh0e," the SEC said. In the movie Wall Street, "Blue Horseshoe loves Anacot Steel" was a code phrase used by actor Charlie Sheen to pass along an insider tip.

Attorneys for Cohen and Myers did not immediately respond to calls seeking comment.

Myers had garnered more than $600,000 in profits trading on the inside information, the SEC said.

In a parallel proceeding, the U.S. Attorney for the Southern District of California filed criminal charges against Cohen and Myers.

According to the SEC's complaint, the patent agent passed along nonpublic information about Sequenom's plans in January 2009 to acquire Exact Sciences Corp(EXAS.O).

Myers bought 35,000 shares of Exact Sciences before the acquisition was announced on January 9, 2009, the SEC said.

The news sent Exact Sciences' stock up 50 percent, allowing Myers to pocket illegal profits by selling most of the stock over the next few weeks, the SEC said.

The patent agent also passed on tips ahead of Sequenom's April 29, 2009 announcement that investors could no longer rely on previous data about its Down syndrome test, the SEC said.

Myers bought Sequenom put options just before the announcement, which caused a 75 percent drop in the company's stock, according to the SEC complaint.

Myers later sold that entire position for illegal profits of more than $570,000, the SEC said.

(Reporting by Dena Aubin; Editing by Ted Kerr)

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NEW YORK (Reuters) – Stocks eked out a small gain on Tuesday as investors' enthusiasm over a tax cut extension deal was short-circuited by rising bond yields and reports regulators were stepping up an insider-trading probe.

The S&P 500 hit a two-year intraday high after U.S. President Barack Obama forged the deal with Republicans to renew Bush-era tax cuts.

But the rally fizzled late as the yield on the 10-year note hit its highest level since June and debt prices fell sharply.

"The smashing that (bonds) are taking today is disconcerting," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

"The spike in interest rates could be enough to stop the equity rally in its tracks."

The rise in yields added to anxiety from news the U.S. Securities and Exchange Commission has issued more than a dozen subpoenas in its investigation of insider trading on Wall Street, potentially undermining public confidence in the markets.

Optimism over the tax agreement sent the S&P 500 to a new intraday two-year high and above a key technical measure, but the index retreated, confirming the 1,228 level remains a strong resistance point.

Analysts said the lofty heights recently attained by stock indexes may have also given investors reason to pause due to skittishness.

"The market has had a nice run. Investors are a little nervous about the move we just had and are looking for any type of reason to sell off," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

Still, he noted the pullback could signal additional room for a move higher in equities.

The Dow Jones industrial average (.DJI) dropped 3.03 points, or 0.03 percent, to 11,359.16. The Standard & Poor's 500 Index (.SPX) added 0.63 points, or 0.05 percent, to 1,223.75. The Nasdaq Composite Index (.IXIC) gained 3.57 points, or 0.14 percent, to 2,598.49.

Volume surged on Tuesday as more than 11 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq. That compared with the year-to-date estimated daily average of 8.63 billion.

The CBOE volatility index (.VIX) closed at 17.99 -- its lowest level since April and below a key technical resistance at 18.

Citigroup (C.N) shares rose 3.8 percent to $4.62 on massive volume after the U.S. government sold its remaining stake in the company. The move could lead to an increased weighting for the bank in the S&P 500 as the company moves to a 100 percent float, according to Credit Suisse.

Credit Suisse estimated that portfolios following the S&P may need to buy up to 375 million Citigroup shares, although the timing of the purchases was uncertain. Citigroup volume totaled nearly 3.1 billion shares, roughly 30 percent of the total volume of 10.9 billion.

3M Co (MMM.N) shares fell 3.1 percent to $84.19. The Dow component forecast 2011 profit that could top expectations but issued an outlook for sales growth that was lower than some analysts expected.

In other corporate news, natural gas distributor Nicor Inc (GAS.N) climbed 4.3 percent to $48.79 after it agreed to be acquired by rival AGL Resources Inc (AGL.N) for $2.4 billion. AGL shed 5.8 percent to $34.

Talbots Inc (TLB.N) plunged 22.7 percent to $8.

Advancing stocks outnumbered declining ones on the NYSE by 1,496 to 1,485, while on the Nasdaq, advancers beat decliners 1,485 to 1,162.

(Reporting by Chuck Mikolajczak; Additional reporting by Rodrigo Campos; Editing by Kenneth Barry)

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WASHINGTON – Federal regulators on Tuesday charged a former partner at Deloitte & Touche LLP and his wife with insider trading, accusing the couple of providing confidential information on company acquisitions to relatives overseas.

The Securities and Exchange Commission announced the civil charges against Arnold McClellan and his wife, Annabel, who live in San Francisco. The SEC alleged in a lawsuit that the McClellans gave advance notice of at least seven acquisitions planned by the accounting firm's clients to Annabel's sister and brother-in-law in London, Miranda and James Sanders. The SEC said James Sanders' trades off the confidential information reaped profits of $3 million.

Annabel McClellan, 38, was arrested Tuesday by FBI agents on criminal charges of obstructing the SEC's investigation of the case. The indictment, handed up by a federal grand jury in San Francisco on Nov. 23, was unsealed Tuesday. McClellan appeared in federal court and was released on a $250,000 bond; she is scheduled to be in court again on Dec. 14.

The McClellans, through their attorneys, disputed the SEC's civil charges and said they would contest them in court.

The agency is seeking unspecified fines and restitution from them.

Arnold McClellan, 51, headed one of Deloitte's regional mergers-and-acquisitions teams, giving him access to highly confidential information, the SEC said. He provided tax and other advice to clients who were considering acquiring companies. He was a tax partner at the firm from 1995 to 2008, according the complaint.

"If the (SEC) allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies," New York-based Deloitte said in a statement. "Deloitte is committed to safeguarding non-public client information and has cooperated with the SEC throughout its investigation. The SEC does not allege any wrongdoing by Deloitte in this unfortunate matter."

Britain's market regulator, the Financial Services Authority, announced charges Tuesday against the Sanders and colleagues of James Sanders to whom he passed the confidential information, the SEC said. The people who received the information from Sanders made about $20 million from trading on it, according to the SEC.

The information concerned pending transactions involving Kronos Inc., aQuantive Inc. and Getty Images Inc., the SEC said.

"Deloitte and its clients entrusted Arnold McClellan with highly confidential information," Marc Fagel, director of the SEC's San Francisco office, said in a statement. "Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple's own benefit and their family's enrichment."

Elliot Peters and Christopher Kearney, attorneys for Arnold McClellan, said in a statement that he denies the SEC's claims "and will vigorously contest them."

"He did not trade on insider information, and there will be no evidence that he passed along any confidential information to anyone," the statement said. "He had no financial incentive to commit the actions alleged. He is a conscientious, law-abiding professional with a 23-year unblemished track record of client service at Deloitte to prove it. We will see the SEC in court."

Annabel McClellan's lawyer, Nanci Clarence, said her client "denies these allegations and did nothing wrong."

"She did not trade on nor did she possess insider information," Clarence said by telephone.

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TOKYO (Reuters) – The Tokyo Stock Exchange (TSE.UL) said on Friday it is looking into a spate of complaints about recent trades involving heavy short-selling ahead of new share issues.

A growing number of investors at home and overseas are asking it to take action on what they believe to be insider trading, said Kazuhiko Yoshimatsu, a spokesman for the bourse.

The bourse declined to say if it had opened a formal investigation or comment on which new share issues were the subject of the complaints.

He added that investors were concerned that information may have been leaked when brokerages, on behalf of issuers, sound out institutional investors to gauge demand for new shares.

The Financial Times reported that the Securities and Exchange Surveillance Commission was also examining the issue.

"It is something we cannot allow to continue. We have no intention of leaving the problem unaddressed," Atsushi Saito, TSE chief executive, was quoted by the FT as saying.

SESC officials are not immediately available for comment.

(Reporting by Tim Kelly and Taiga Uranaka; Editing by Edwina Gibbs)

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