U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

SEC Charges Medical Researcher With Tipping Inside Information About Clinical Trial


Washington, D.C., Nov. 2, 2010 — The Securities and Exchange Commission today charged a French medical doctor and researcher with breaking securities laws by tipping a hedge fund manager with confidential information about a clinical trial that he was involved in.

The SEC alleges that Yves M. Benhamou, M.D., breached his duty of confidentiality to Human Genome Science, Inc. (HGSI) when he illegally tipped non-public negative details about a clinical trial for the drug Albumin Interferon Alfa 2-a (Albuferon) ahead of a public announcement by the company.

"Whether it is news about upcoming mergers, operating results, or as in this case clinical drug trials, passing confidential information to others to give them an unfair trading advantage is illegal," said Robert Khuzami, Director of the SEC's Division of Enforcement. "People entrusted with confidential information, including doctors and researchers, cannot use their positions to help others game the system."

According to the SEC's complaint filed in U.S. District Court for the Southern District of New York, Benhamou was a member of the Steering Committee overseeing HGSI's clinical trial of Albuferon, a potential drug to treat Hepatitis C. Benhamou learned about two serious adverse events, including one death, occurring during the third phase of the trial. HGSI consequently decided to reduce the dosage for the patients in that arm of the trial and publicly announce the changes.

The SEC alleges that Benhamou tipped material, non-public information about the trial to the hedge fund portfolio manager upon learning of each new negative development. While serving on the Steering Committee, Benhamou provided consulting services to the portfolio manager with whom he had developed a friendship over the years. The portfolio manager, based on the confidential information provided by Benhamou, ordered the sale of the entire position of HGSI stock held by six health care-related hedge funds that he co-managed (approximately 6 million shares). These sales occurred during the six-week period prior to HGSI's public announcement on Jan. 23, 2008, that it was reducing the dosage in one arm of the trial. Two million shares were sold in a block trade just before the markets closed on January 22. HGSI's share price dropped 44 percent by the end of the day on January 23. As a result of the sales, the hedge funds avoided losses of at least $30 million.

Benhamou is charged with violating the antifraud provisions of the federal securities laws. The Commission is seeking a permanent injunction, disgorgement of any ill-gotten gains with prejudgment interest, and a financial penalty against Benhamou.

In a parallel criminal proceeding, the U.S. Attorney's Office for the Southern District of New York today announced a criminal action against Benhamou.

Matthew L. Skidmore and Deborah A. Tarasevich conducted the SEC's investigation, and Suzanne J. Romajas will lead the SEC's litigation. The Commission acknowledges the cooperation of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the French Autorité Des Marchés Financiers.

The SEC's investigation is ongoing.

# # #

For more information about this enforcement action, contact:

Cheryl J. Scarboro
Associate Director, SEC Division of Enforcement
(202) 551-4403

Deborah A. Tarasevich
Assistant Director, SEC Division of Enforcement
(202) 551-4726



Modified: 11/02/2010