SEC Charges Stockbroker and Friend With Insider Trading

The Securities and Exchange Commission today charged a stockbroker and his friend with participating in an insider trading scheme to profit in advance of two major announcements out of a pharmaceutical company. 

The SEC alleges that Paul T. Rampoldi coordinated the insider trading with two other brokers at his firm as well as a then-IT executive at Ardea Biosciences.  The Ardea employee tipped one of the brokers ahead of the company’s announcement of an agreement to license a cancer drug and later tipped him in advance of its acquisition by AstraZeneca PLC.  The SEC charged the other two brokers and the Ardea employee last year.

According to the SEC’s complaint filed in federal court in San Diego today against Rampoldi and William Scott Blythe III, they made approximately $90,000 in illicit profits by trading ahead of those announcements based on nonpublic information that flowed to them through one of the fellow brokers who learned it from the other after he was tipped by the IT executive.  It was decided that in order to evade detection by the compliance department at the brokerage firm where Rampoldi and the others worked, Blythe would fund the purchase of Ardea call option contracts in a brokerage account he held at a different brokerage firm, and they would subsequently divide the profits among them.

“As a stockbroker, Rampoldi should have known better than to allegedly trade on tips about significant corporate events before they were announced,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.  “We further allege that Rampoldi and Blythe tried to evade detection by hiding their trading elsewhere, but to no avail.”

In a parallel action, the U. S. Attorney’s Office for the Southern District of California today brought criminal charges against Rampoldi and Blythe.

The SEC’s complaint charges Rampoldi and Blythe with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks permanent injunctions as well as disgorgement, interest, and penalties.

The SEC’s investigation was conducted by Patricia A. Paw, John S. Rymas, Daniel Koster, and Brendan P. McGlynn of the Philadelphia office, and supervised by G. Jeffrey Boujoukos.  The litigation will be led by David L. Axelrod and Michael J. Rinaldi.  The SEC appreciates the assistance of the U. S. Attorney’s Office for the Southern District of California, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.