A former Merck & Co. executive bought shares in a company Merck was acquiring 14 minutes after a Merck lawyer warned him not to trade in the stock.
Yang Xie was the director of a research unit at Merck.
He settled the SEC’s charges by paying a penalty and disgorgement of about $9,000.
The Merck lawyer sent Xie an email at 4:04 pm on November 20, 2014. The email warned against trading Cubist stock until there had been a public announcement about the acquisition.
Six minutes later, Xie replied to the e-mail and acknowledged receiving it.
But eight minutes after that, Xie bought 80 shares of Cubist stock.
Merck’s tender offer for Cubist was completed on January 21, 2015. Xie sold his Cubist stock that day and made a 39 percent profit.
When the SEC investigated the trades, Xie “allegedly denied learning about Merck’s proposed acquisition of Cubist until the night before it was publicly announced,” the SEC said.
The SEC filed a civil complaint (pdf) against Xie in federal court in New Jersey.
Xie settled the case without admitting or denying the SEC’s findings.
He agreed to disgorge $2,287 — the amount of his trading profits — plus prejudgment interest and a $6,681 civil penalty equal to three times his trading profits.
The settlement is subject to court approval.
The case is Securities and Exchange Commission v. Yang Xie, No. 18-CV-02779 (D.N.J. filed February 27, 2018)
Richard L. Cassin is the publisher and editor of the FCPA Blog.