[Online Exclusive]: Investigation of UCLA researcher for alleged insider trading continues

A prominent UCLA cancer researcher, reported in a Seattle Times
article to have sold insider information about a potential new drug
to Wall Street investors, is still under investigation by both a
panel of UCLA faculty and the Securities and Exchange Commission,
with no end in sight for either inquiry, officials said.

Dr. Robert Figlin ““ who was said to have sold investors
information about the future of a possible kidney cancer drug
called Sutent ““ has said that he has done nothing wrong. He
declined to comment on the investigations.

“We’re just in the process of doing this
thing,” said Dr. Stanley Korenman, associate dean of ethics
and a professor at the David Geffen School of Medicine, who is
heading the UCLA investigation. “We’re going to do an
information developing thing about Dr. Figlin’s involvement,
and we’re going to see what the implications are for UCLA as
a whole.”

Korenman said that he did not know when the investigation would
be finished or what would happen afterwards.

Figlin’s case, along with the others reported in the
Times, has been added to the list of other possible insider trading
cases in the medical research field currently under investigation
by the SEC, an SEC official said. The SEC, like Korenman, said that
there was no way to know when the investigation would be completed
or what the outcome might be.

The nature of cases like Figlin’s contributes to the
drawn-out investigation process, a former SEC official said.

“(Insider trading) cases often depend on circumstantial
evidence,” said Thomas Newkirk, former associate director of
enforcement at the SEC, explaining why such cases are often long
and complicated. “Unless somebody confesses, you’ve got
to put together a case based on the circumstances.”

In a case like those reported in the Times, which Newkirk called
“tipping violations,” it must be proved that the
“tipper” who shares the information with investors is
“sharing material, non-public information,” Newkirk
said.

“I would guess that there’s likely to be dispute
about whether or not the information was material (in
Figlin’s case),” Newkirk said, adding that in
securities laws, “material” means “a fact that a
reasonable investor would take into account in deciding whether to
buy, sell or hold a security.”

He said that the tipper must also have had “a duty of
trust and confidence” not to share that information with
someone else, if “he knows or has reason to know that the
person is going to trade on the information.”

This can complicate cases like Figlin’s, because,
according to the Times article, some of the information that Figlin
allegedly shared came from another doctor working on a drug called
Sorafenib, rather than from Figlin’s own research.

Newkirk, who declined to comment specifically on Figlin’s
case, said, in general, “it can go through two or three
people. If A has material information and he passes it on to B, and
B knows or is reckless in not knowing that that material was given
to him in confidence, then he would be breaching the law in passing
that material on to C.”

Both Newkirk and current SEC officials said that the outcome of
the investigation will depend on a number of complex factors.

“It’s going to depend on what exactly the
information was that was conveyed, whether it’s just a tiny
little piece of information that by itself is not significant, or
whether the information is in fact of some significance,”
Newkirk said.