Hedge Fund Portfolio Manager Traded on Material Nonpublic Information about Drug’s Clinical Trials
A hedge fund portfolio manager was barred from the industry and sentenced to 9 years in prison for insider trading on behalf of the funds he managed. The SEC alleges that the portfolio manager developed a relationship, through an expert network firm, with a doctor involved with a drug’s clinical trials, thereby giving him access to material nonpublic information. The doctor provided the hedge fund manager with negative information about impending clinical trial results, which caused the portfolio manager to sell the securities of the two pharmaceutical firms developing the drug. The funds made $275 Million in profits or avoided losses, and the PM received a $9.3 Million bonus.
Any pecuniary benefit from misusing material nonpublic information can and will result in criminal and civil penalties. The SEC need not allege that the perpetrator directly benefited by trading for his or her own account.