SEC Charges Swiss Pharmaceutical Executive with Insider Trading
Aug. 15, 2019
File No. 3-19355
August 15, 2019 – The Securities and Exchange Commission today announced the institution of settled cease-and-desist proceedings against Lorenz Erne, a Switzerland-based former executive with F. Hoffmann-La Roche AG, the Swiss pharmaceuticals and diagnostics company. Erne agreed to settle charges that he engaged in insider trading in the securities of Spark Therapeutics, Inc. (“Spark”), a U.S.-based gene therapy company, ahead of the public announcement of a merger agreement between Spark and Roche Holding Ltd (“Roche”), the parent company of F. Hoffmann-La Roche AG.
According to the SEC’s order, Erne learned about the prospective merger through his employment and knew that such information was confidential and nonpublic. As detailed in the order, Erne purchased securities in Spark on two occasions prior to the February 25, 2019 merger agreement announcement. Pursuant to the agreement, Roche agreed to make a cash tender offer for the outstanding shares of Spark common stock. After the announcement, the closing price of Spark common stock rose by 120% from the previous day’s close, and as a result of his purchases, Erne obtained illicit profits of $159,228. After Roche’s legal department requested information from Roche employees in connection with a Financial Industry Regulatory Authority inquiry, Erne reported his Spark securities purchases to Roche’s legal department and to the Commission staff.
The SEC’s order finds that Erne violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the tender offer provisions of Exchange Act Section 14(e) and Rule 14e-3 thereunder. Without admitting or denying the findings, Erne agreed to a cease-and-desist order and agreed to pay $159,228 in disgorgement and a penalty of $79,614.
The SEC’s investigation was conducted by Michelle I. Bougdanos of the Home Office and John S. Rymas of the Market Abuse Unit’s Analysis and Detection Center. The case was supervised by David Frohlich, Carolyn M. Welshhans, and Joseph G. Sansone, Chief of the Market Abuse Unit. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.