The Securities and Exchange Commission today charged a New York-based couple with insider trading in the stock of the pharmaceutical company where one of them worked as a clinical trial project manager.
The defendants have agreed to pay more than $325,000 to settle the charges.
According to the SEC’s complaint, Holly Hand was the senior project manager overseeing a clinical drug trial for a company then known as Neuralstem Inc. As alleged, after Hand learned of negative efficacy results from the trial, she tipped Chad Calice, who then sold all of his Neuralstem stock ahead of the public announcement of the negative news.
The complaint alleges that while selling his shares, Calice tipped off his uncle, who then also sold his entire Neuralstem position that day. According to the complaint, after the negative news was announced the next morning, the price of Neuralstem stock dropped by approximately 50%.
As alleged, by selling their stock in advance of the news, Calice avoided losses of $103,875 and his uncle avoided losses of $14,434.
“Public company employees owe shareholders a duty to safeguard the confidentiality of company information and not to personally benefit, directly or indirectly, from the misuse of such information,” said Richard R. Best, director of the SEC’s New York Regional Office. “The complaint alleges that Hand improperly shared confidential information with Calice, allowing him to trade on and benefit from information that other Neuralstem shareholders did not possess.”
The SEC’s complaint, filed in federal district court in Manhattan, charges Calice and Hand with violating the antifraud provisions of the federal securities laws. Without admitting or denying the complaint’s allegations, Calice and Hand have consented to the entry of a final judgment that enjoins them from violating the charged provisions and requires each of them to pay a civil penalty. Calice has agreed to pay a $222,184 penalty, and Hand has agreed to pay a $103,875 penalty. The proposed settlement is subject to court approval.
The SEC’s investigation was conducted by Cynthia A. Matthews and George N. Stepaniuk of the New York office. The case was supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.