The U.S. Securities and Exchange Commission (SEC) announced that it has agreed to settle enforcement actions against a Florida man trading on inside information ahead of a pharmaceutical company merger, as well as the friend who tipped him off.
Jay Y. Fung has agreed to pay back over $700,000 in illegal profits plus an additional $60,000 in interest earned after allegedly purchasing stock and call options in Pharmasset based on his friend’s tip that it was about to be acquired.
The agency alleged that Fung cashed in when Pharmasset’s stock rose 84% after its acquisition by Gilead Sciences was publicly announced, and he then paid kickbacks to his friend who provided the nonpublic information.
In the report the SEC said:
The SEC previously charged Fung’s friend and tipper Kevin Dowd, who learned the nonpublic information during his employment at an investment advisory firm where a Pharmasset board member maintained an account and confidentially sought financial advice in advance of the acquisition. Dowd has since cooperated with the SEC’s investigation and agreed to pay back the cash kickbacks he received from Fung and be barred from the securities industry and penny stock offerings. Dowd also pleaded guilty in a parallel criminal case.
The SEC has filed a complaint against Fung in federal district court in Newark, N.J., and the U.S. Attorney’s Office for the District of New Jersey has announced parallel criminal charges. It’s also worth noting that the SEC’s settlements with Fung and Dowd are subject to court appeal.
Joseph G. Sansone, co-chief of the SEC’s Market Abuse Unit, commented:
SEC enforcement staff continue to develop and refine analytical tools to uncover illicit trading activity and hold accountable those abusing the markets for their own financial gain.
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