Days ago, the SEC obtained partial final consent judgments against three individuals charged with trading on material non-public information in Portola Pharmaceuticals securities.
In its complaint, the SEC contends that one of the defendants, a vice-president at Alexion Pharmaceuticals Inc., knowingly or recklessly tipped non-public, confidential information to a close friend regarding an expected May 2020 announcement of an acquisition of Portola via a tender offer by Alexion. The SEC further alleged in its charging document that the friend then used that information to trade, and then tipped two other individuals, who also proceeded to trade and realize profits. On the release of the news of the acquisition, the stock price of Portola rose in excess of 130%.
All three individuals have pled guilty to securities fraud criminal charges brought in a parallel action in the Southern District of New York.
Each defendant in the SEC case consented to judgments prohibiting their further violations of the federal securities laws, specifically: Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, as well as Section 14e-3 of the Exchange Act and Rule 14e-3 thereunder. (Section 14e-3 prohibits insiders of the bidder and the target from disclosing confidential information regarding a tender offer). In addition to the injunctions, the SEC sought and obtained officer or director bars for each individual such that they cannot serve in such capacity in a public company.
The settlement was structured as a bifurcated proceeding such that the district court will assess monetary remedies, if any, against defendants at a subsequent date. In my experience, in the event the defendants get jail time in the criminal cases, the SEC will typically waive the imposition of a civil penalty under the reasoning that incarceration is alone sufficient punishment.
David Chase is a seasoned SEC defense lawyer and former SEC Enforcement Attorney with over 30 years of experience. While at the SEC, he investigated and prosecuted insider trading cases, and for the past 23 years has defended those under SEC investigation for insider trading. You may contact him toll-free at: 800-760-0912 or e-mail at: firstname.lastname@example.org, and can visit the Firm’s website for more information on defending insider trading investigations at: www.securitiesfrauddefense.com.