Options Trader Settles Insider Trading Charges
Insider trading has long been prohibited by the Commission. While there is nothing in the text of Section 10(b) that specifically prohibits or even references insider trading, over the years the agency has brought a series of cases in which the elements of a claim have been crafted. Today, those elements are well defined. It can, however, prove difficult to uncover. At least that is surely what the trader in the most recent insider trading case brought by the agency thought as he placed his trades using only high risk option trades. SEC v. Rubin, Civil Action No. 23-cv-15013 (N.D. Ill. Filed October 17, 2023).
Defendant Brian Marc Rubin was unemployed at the time of the events here. Previously, he had been employed as an options trader.
This case centers on a tender offer by Pfizer Inc., a global biopharmaceutical firm for Array BioPharma Inc., a firm that developed certain cancer treatments. Mr. Rubin’s spouse worked at Array as an Access Account Director in the Midwest region. She was responsible for educating medical providers and insurers about her employer’s products prior to market launch. She also gathered market research regarding the firm’s drugs. The couple generally exchanged confidential information. They also had brokerage accounts controlled by Mr. Rubin.
During the period of late March – April 2019 Array and Pfizer entered into confidentiality agreements to exchange information regarding the Acquisition. During the same period Defendant’s spouse learned from her company colleagues that the firm would likely be acquired. She had long been concerned that Array would be acquired and she would lose her job. She thus told her husband before May 6, 2019 that her employer was likely an acquisition target and she would lose her job since it would be eliminated.
On Monday, May 6, 2019 Defendant contacted his investment adviser to secure options trading authorization for his brokerage account. While both spouses were required to sign the forms, Mr. Rubin executed the form for himself and his wife.
On May 9, 2019 the option trading approval was obtained. The same day Defendant began trading options involving Array stock using what is ordinarily viewed as an aggressive and risky strategy. Defendant first collected a premium by shorting put options in Array stock. The proceeds from the transaction were then used to buy out-of the-money call options in Array.
Subsequently, on June 3, 2019 Defendant used essentially the same high risk options trading strategy. When the trades were placed Mr. Rubin’s investment adviser asked if he had inside information – the adviser knew Mrs. Rubin worked at Array. Defendant denied having such information. Defendant had not previously traded options in the account.
Before the market opened on June 17, 2019 Pfizer announced that it would acquire Array by tender offer at $48 per share. After the market open the share price for the stock increased nearly 57%. Mr. Rubin had profits of $90,458, a return of 688%. In contrast, Defendant realized losses on every other equity trade other than Array he opened and closed from October 2017 to January 2020. Defendant also lost money on his trades in other biotechnology stocks during the period. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e).
To resolve the case Defendant consented to the entry of a permanent injunction based on each of the Sections cited in the complaint. He also agreed to pay disgorgement in the amount of $90,458 and prejudgment interest in the amount of $16,914. In a parallel action the U.S. Attorney’s Office for the Northern District of Illinois announced criminal charges against Mr. Rubin. See Lit. Rel. No. 25882 (October 17, 2023).
Options Trader Settles Insider Trading Charges
Insider trading has long been prohibited by the Commission. While there is nothing in the text of Section 10(b) that specifically prohibits or even references insider trading, over the years the agency has brought a series of cases in which the elements of a claim have been crafted. Today, those elements are well defined. It can, however, prove difficult to uncover. At least that is surely what the trader in the most recent insider trading case brought by the agency thought as he placed his trades using only high risk option trades. SEC v. Rubin, Civil Action No. 23-cv-15013 (N.D. Ill. Filed October 17, 2023).
Defendant Brian Marc Rubin was unemployed at the time of the events here. Previously, he had been employed as an options trader.
This case centers on a tender offer by Pfizer Inc., a global biopharmaceutical firm for Array BioPharma Inc., a firm that developed certain cancer treatments. Mr. Rubin’s spouse worked at Array as an Access Account Director in the Midwest region. She was responsible for educating medical providers and insurers about her employer’s products prior to market launch. She also gathered market research regarding the firm’s drugs. The couple generally exchanged confidential information. They also had brokerage accounts controlled by Mr. Rubin.
During the period of late March – April 2019 Array and Pfizer entered into confidentiality agreements to exchange information regarding the Acquisition. During the same period Defendant’s spouse learned from her company colleagues that the firm would likely be acquired. She had long been concerned that Array would be acquired and she would lose her job. She thus told her husband before May 6, 2019 that her employer was likely an acquisition target and she would lose her job since it would be eliminated.
On Monday, May 6, 2019 Defendant contacted his investment adviser to secure options trading authorization for his brokerage account. While both spouses were required to sign the forms, Mr. Rubin executed the form for himself and his wife.
On May 9, 2019 the option trading approval was obtained. The same day Defendant began trading options involving Array stock using what is ordinarily viewed as an aggressive and risky strategy. Defendant first collected a premium by shorting put options in Array stock. The proceeds from the transaction were then used to buy out-of the-money call options in Array.
Subsequently, on June 3, 2019 Defendant used essentially the same high risk options trading strategy. When the trades were placed Mr. Rubin’s investment adviser asked if he had inside information – the adviser knew Mrs. Rubin worked at Array. Defendant denied having such information. Defendant had not previously traded options in the account.
Before the market opened on June 17, 2019 Pfizer announced that it would acquire Array by tender offer at $48 per share. After the market open the share price for the stock increased nearly 57%. Mr. Rubin had profits of $90,458, a return of 688%. In contrast, Defendant realized losses on every other equity trade other than Array he opened and closed from October 2017 to January 2020. Defendant also lost money on his trades in other biotechnology stocks during the period. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e).
To resolve the case Defendant consented to the entry of a permanent injunction based on each of the Sections cited in the complaint. He also agreed to pay disgorgement in the amount of $90,458 and prejudgment interest in the amount of $16,914. In a parallel action the U.S. Attorney’s Office for the Northern District of Illinois announced criminal charges against Mr. Rubin. See Lit. Rel. No. 25882 (October 17, 2023).