Insider Trading
What is Insider Trading?
Buying or selling securities based on material, non-public information in violation of a duty of trust or confidence.
Why does Insider Trading matter?
Insider trading in pharma and biotech typically involves trading on knowledge of FDA decisions, clinical trial results, or M&A activity before public announcement.
The SEC aggressively prosecutes insider trading in biotech because the information asymmetry is enormous — an FDA approval or rejection can move a stock 50%+ in a single day.
Classic patterns: executives selling before a CRL, employees buying before an approval, consultants tipping hedge funds about AdComm votes.
Penalties include up to 20 years in prison and fines of up to $5 million for individuals. The SEC can also pursue civil penalties of up to three times the profit gained or loss avoided.
Related terms
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