The second accused a former director of information technology (“IT”) at a pharmaceutical company that trades material non-public information. The non-public information concerned an upcoming merger, pending FDA drug approvals, and financial performance.

In a complaint filed with the U.S. District Court for the Western District of Pennsylvania, the SEC alleged that between September 2017 and July 2019, the former IT manager received material non-public information from a senior company official. The SEC said the senior executive informed the former CIO of the company’s impending announcement regarding (i) FDA approval of two of the company’s products – a multiple sclerosis treatment and a generic against asthma – and (ii) the merger of the company with another pharmaceutical company. The SEC found that the senior executive informed the former IT manager that these announcements would positively impact the company’s stock price, which would have led the former IT manager to purchase call option contracts. of the company before the announcements.

In addition, the SEC alleged that the senior executive informed the former CIO that the company would report quarterly profits reflecting “below expectations” financial performance, which led the former CIO to sell some of the options in the business. ‘buy the company and buy some of its puts before the announcement.

The SEC also alleged that in exchange for material non-public information, the senior executive ordered the IT manager to make in-person cash payments in India to the senior executive or persons he designated to avoid be detected.

The SEC accused the IT manager of violating the section 10b) (“Regulating the Use of Manipulative and Deceptive Devices”) of the Exchange Act and the SEA Rule 10b-5 (“Use of manipulative and deceptive devices”) and seeks (i) a permanent injunction, (ii) the imposition of a civil monetary penalty and (iii) a member of the bar.

In a related action, the former IT manager pleaded guilty at the expense of the DOJ for securities and tax evasion.

Primary sources

1. SEC Press Release: SEC Charges Former Global Pharmaceuticals IT Director With $ 8 Million Insider Trading Scheme
2. Complaint to the SEC: Dayakar R. Mallu
3. Ministry of Justice press release: Former IT executive pleads guilty to insider trading and assisting in preparing a false tax return

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