On March 1, 2023, the U.S. Department of Justice and the Securities and Exchange Commission announced insider trading charges against Terren Peizer, the CEO and Chairman of a California-based healthcare services company called Ontrak, Inc. (the “Company”) for allegedly selling Company securities while in possession of material, non-public information (“MNPI”) that one of the Company’s major customers was likely to cancel its contract. Continue Reading DOJ and SEC Charge Healthcare Executive With Insider Trading Through a Rule 10b5-1 Trading Plan, Marking DOJ’s First Such Indictment
Adam Fleisher
Second Circuit Decision Limits the Ability to Prosecute Instances of Trading on Confidential Government Information
On December 29, 2022, in a closely-watched insider trading case, the Second Circuit decided United States v. Blaszczak (“Blaszczak II”).[1] The Supreme Court in January 2021 had vacated and remanded the Second Circuit’s prior decision in light of Kelly v. United States (also known as the “Bridgegate” decision). On remand, a divided panel of the Second Circuit found that trading on the basis of certain confidential government information related to pending regulation does not give rise to violations of the criminal wire fraud and securities fraud statutes.Continue Reading Second Circuit Decision Limits the Ability to Prosecute Instances of Trading on Confidential Government Information
SEC’s “Shadow Trading” Insider Trading Case Allowed to Proceed
On January 14, 2022, the United States District Court for the Northern District of California issued a decision in SEC v. Matthew Panuwat[1] validating the legal theory advanced by the Commission that trading in the securities of a competitor company could form the basis of an insider trading violation where the defendant learned that an acquisition of his employer was imminent. In denying the defendant’s motion to dismiss the complaint, the court ruled that the SEC had sufficiently pled a claim, marking the first judicial decision concerning alleged insider trading in securities of a company based on material, nonpublic information (“MNPI”) about another company, a practice that has sometimes been referred to as “shadow trading.” The court’s refusal to dismiss the SEC’s novel legal theory that trading on the basis of MNPI of one company to profit on a securities transaction involving a competitor constitutes actionable insider trading should be considered by companies and individuals as they assess trading decisions and policies.
Continue Reading SEC’s “Shadow Trading” Insider Trading Case Allowed to Proceed
SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD
On March 5, 2021, the Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against AT&T, Inc. (“AT&T”) for violating Regulation FD, and also charged three of AT&T’s Investor Relations executives with aiding and abetting this violation.[1] Reg FD (which stands for “Fair Disclosure”) prohibits companies from selectively disclosing material nonpublic information to certain categories of individuals, including analysts and investors, and is intended to promote full and fair disclosure of such information in order to ensure that all investors have equal access to potential market-moving information.[2]
Continue Reading SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD
SEC Brings Settled Action Against Mylan N.V. for Alleged Failure to Disclose Government Investigation
Companies that face non-public government investigations frequently confront challenging questions regarding whether and when to disclose the existence of the investigation, how much to disclose, and any duty to update the disclosure as the investigation proceeds. The SEC recently filed a settled complaint alleging that Mylan committed accounting and disclosure violations for failing to timely…