SEC: Insider Bought Minutes After Warnings Not to Trade
Litigation Release No. 24056 / February 28, 2018
Securities and Exchange Commission v. Yang Xie, No. 18-CV-02779 (D.N.J. filed February 27, 2018)
A former Merck & Co. Inc. employee who bought stock in a company that Merck was preparing to acquire in a tender offer agreed to pay a penalty equal to three times his illegal insider trading profits to settle an action by the Securities and Exchange Commission.
According to the SEC's complaint, on November 20, 2014 at 4:04 p.m., Yang Xie, then-Director of Global Health Outcomes Research for Merck, received an email from a Merck attorney discussing a contemplated merger between Merck and Cubist Pharmaceuticals, Inc. The email included an attachment advising recipients not to trade in Cubist's stock until a full trading date had elapsed after a public announcement of the acquisition. The complaint alleges that, approximately six minutes later, Xie replied to the e-mail and acknowledged receiving it. Approximately 14 minutes after he received the Merck attorney's email, Xie bought 80 shares of Cubist stock. On January 21, 2015, the date the tender offer was completed, Xie sold his Cubist stock and realized illegal profits of approximately 39%. During the SEC's investigation that followed, Xie allegedly denied learning about Merck's proposed acquisition of Cubist until the night before it was publicly announced.
The SEC's complaint, filed in federal district court in New Jersey, charges Xie with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and Exchange Act Section 14(e) and Rule 14e-3. Without admitting or denying the SEC's allegations, Xie has agreed to the entry of permanent injunctions as well as to pay disgorgement of $2,287, which represents Xie's trading profits, plus prejudgment interest and a $6,681 civil penalty of three times his trading profits. The settlement is subject to court approval.
The investigation was conducted in the SEC's Home Office by Adam Eisner and Keith O'Donnell and supervised by C. Joshua Felker, Stephan Schlegelmilch, and Melissa Hodgman. The SEC appreciates the assistance of the SEC's Office of Inspector General, the U.S. Attorney's Office for the District of New Jersey, and the Financial Industry Regulatory Authority.