The SEC charged a former pharmaceutical company CFO, along with his former "romantic partner," for trading on the company's stock using insider information. The material nonpublic information was related to an FDA decision that was tied to the effectiveness of a breast cancer drug in development.
In the Complaint filed in the U.S. District Court for the District of New Jersey, the SEC stated that the former CFO became aware of a positive FDA determination regarding the drug's effectiveness based on earlier trial data. The FDA permitted the company to halt clinical trials for the drug. The SEC alleged that the former CFO tipped this material nonpublic information to his romantic partner, as well as three relatives, despite the CFO and his partner being subject to a trading prohibition. The SEC found that shares in the company were purchased prior to the publication of the information, resulting in the romantic partner profiting $67,060, while the tipped relatives profited approximately $21,400.
The former CFO and his former romantic partner were charged with violations of SEA Section 10(b) ("Regulation of the use of manipulative and deceptive devices") and SEA Rule 10b-5 ("Employment of manipulative and deceptive devices"). The agency sought a permanent injunction and civil penalties against both parties. In addition, the SEC sought a prohibition for the former CFO, which would prevent them from holding a director or officer position at any company that (i) has shares registered under SEA Section 12 ("Registration requirements for securities"), or (ii) is required to file reports under SEA Section 15(d) ("Registration and regulation of brokers and dealers - supplemental filing requirements for issuers").
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
