A pharmaceutical company employee engaged in insider trading and illegally tipped his childhood friend with information about his employer’s business relationships and upcoming transactions with other pharmaceutical companies, according to the SEC and the DOJ. The employee allegedly gained nonpublic information through his job, which he shared with his friend, who also used the information to trade for himself and for his brokerage customers (SEC v. Maciocio, June 3, 2016).
Scheme. According to the SEC and the DOJ, beginning in 2008, an employee of a pharmaceutical company acquired nonpublic information as a result of his role first as an associate research fellow and later as a director of chemical research and development at the company. He used this information to trade in securities of companies that his employer was considering as potential acquisition targets or business partners.
The employee also allegedly tipped his childhood friend, a stockbroker, about acquisitions and transactions under consideration by the pharmaceutical company. The broker traded on his friend’s tips in his own account and in several customer accounts. The scheme continued for six years and resulted in illicit trading profits of $116,000 for the employee, $187,000 for his friend, and $145,000 for the brokerage customers of the friend.
Sanctions sought. The SEC’s civil complaint charges the two men with violating the antifraud provisions of the Exchange Act and seeks disgorgement, penalties, and permanent injunctions. The criminal indictment charges the two men with securities fraud and conspiracy to commit securities fraud and wire fraud. The U.S. Attorney’s Office for the Southern District of New York announced that the pharmaceutical company employee pleaded guilty to the charges before Magistrate Judge Barbara Moses on May 20, 2016, and will face sentencing at a later date. The criminal counts carry possible sentences of five to 20 years in prison.
Attorneys: Michael David Birnbaum for the SEC.
MainStory: TopStory FraudManipulation Enforcement InvestmentAdvisers NewYorkNews
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