Biotech Insider Information
We are a very small circle of people in our business and if you stay in this business long enough you will get to know nearly every executive at every biotech company, especially if you are out catering to investors and hawking your company's technology at investment conferences. Invariably, someone says something that twinges your inner ear and your interest is piqued and no one else knows about it (so you think) and it is a public company. Whatever you think in that little inner brain, the primal one, DO NOT TRADE on that information.
The recent article by John Carroll in Endpoints News about Ariad and some insider information ahead of Ariad's pending black box warning, illustrates the dangers of buying and selling public traded stock based on insider information. So here we are June 28th, 2017, Ariad has been sold and the SEC is cramming down on the investors that sold stock ahead of the BAD news announcement. The Friends and Family trading cabal not only brought fines but it is now destroying the personal reputations of those insiders. One person worked in pharmacovigilance and the other in risk management. This happened in 2012 and 2013, why did it take so long? Why these people? The trades really had very little effect on the plunge of Ariad's stock after the black box warning announcement on Iclusig and the market impact of the trades did not set off a panic selling spree. We have automated computer algorithms and professional shorters to do that!
The message is that the SEC (Securities Exchange Commission), FINRA (Financial Industry Regulatory Authority), DOJ (Department of Justice) and the IRS (Internal Revenue Service) all SHARE INFORMATION, so your stock broker is regulated by FINRA and your company is regulated by the SEC and the IRS gets to see all your 'profits and losses'. There is NO escape. If you, a family member or friend trade on insider information, no matter how remote you might think you are, you will get caught.
Here is the way it usually works: The CFO was notified by FINRA that an investigation was mounted to see if 'there was any insider information' that was passed on to a list of nearly 30 and sometimes hundreds of people that benefited from the run up in the share price and traded accordingly. Each board member of the Company has to review that list and disclose whether or not they know any of the individuals and how the member knew them. That is the first step. That questioning is also done under the 'perjury' clause which FINRA points out very clearly. The Executive staff is also included in this 'fishing' exercise. As a member of the Company, if you perjure yourself, the the next meeting is with the DOJ.
Personally all my communication are always restricted to corporate counsel, management and the rest of my board members on the boards that I sit on, one public and one private. Breaching the fiduciary responsibility as a board member, is in my mind, just not done. So don't you do it either! If you want a thrill, go to the racetrack and bet on the ponies...Also as Board Members, Executive Staff and Employees of the Company We all are also notified when we 'The Company' are in a 'blackout' period, meaning, we as insiders, can neither buy nor sell the company stock (or talk about it with outsiders!). Blackouts are always around reported earnings and an automatic blackout is news of either something really good, or something really bad and sometimes just middling news, doesn't matter. That Black Out must be self imposed
It is great to be a member of a public and private companies in our business, we get to work on important products for people and animals that really need them and in so doing, we help improve their lives and we get to make money in so doing as well. Insider trading with friends and family is the most deadly because you trust them. But when the subpoena shows up and you are read the 'riot act' by an investigating officer, it is a completely different story. Ask Martha Stewart and Sam Waksal about the consequences of insider trading...also on pending news from the FDA....