SEC v. Bankosky

716 F.3d 45 (2nd Cir. 2013)

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Nature of the Case

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Facts

From January 2008 until 2011, D worked for the pharmaceutical company Takeda Pharmaceuticals International, Inc. (Takeda) as a director of Global Licensing and Business Development and then as a senior director. D had access to, and did obtain, material non-public information regarding Takeda's discussions with outside companies about strategic alliances, mergers, and product acquisitions. Despite a company policy prohibiting trading on such inside information, from 2008 to 2011 D bought call options in the shares of four companies in advance of anticipated deal announcements between these companies and Takeda. D sold the options and realized profits of $63,000. On February 9, 2012, the SEC (P) filed this action below. The consent judgment was entered March 15, 2012, imposing a permanent injunction against further violations, ordering disgorgement of $63,000 plus pre-judgment interest, and imposing a civil penalty of $63,000. On March 30, 2012, P moved to bar D permanently from serving as an officer or director of any company whose shares are registered under the Exchange Act. Emails referenced in the complaint and attached as exhibits demonstrate that D was aware of the confidential negotiations with Cell Genesys and even worked on the project before it went public. The district court evaluated D's fitness to serve as an officer or director, applying the six factors set out in SEC v. Patel. The court noted that D's conduct, though 'undeniably serious and not isolated,' was not the sort typically considered egregious and the fact that he was not a repeat offender was 'particularly relevant.' It then found that D, though not an officer or director, was 'acting in a corporate or fiduciary capacity . . . where he and his colleagues were involved in the due diligence and negotiations for deals with other pharmaceutical companies'; he knowingly engaged in insider trading; his misleading SEC testimony was particularly troubling; he had a personal economic stake in the trades; and, given his continued effort to contest the wrongfulness of his actions, there were no 'assurances against future misconduct.' The court prohibited D from acting as an officer or director of any public company for ten years. D appealed.