(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

Family Members Charged with Insider Trading

The SEC charged seven individuals with engaging in an insider trading scheme that netted over $3.7 million in profits and losses avoided over four years. The defendants included a father and his three sons, a family-run hedge fund, other relatives and friends as well as unrelated accountants and lawyers.

The complaint alleged that the father, formerly an executive with Taro Pharmaceuticals Industries, tipped his sons with confidential information concerning at least 13 separate Taro announcements, including earnings results and drug approvals. The family allegedly pooled their money into a hedge fund in order to help conceal their trading in Taro securities. In addition to trading in Taro stock and options in advance of the announcements, one of the sons allegedly tipped his supervisor at his law firm, a friend who worked at an accounting firm, and his father-in-law. Two of the defendants are also charged with using confidential information obtained from their employers, PricewaterhouseCoopers and Ernst & Young, concerning two possible mergers.

Mark K. Schonfeld, director of the Commission's Northeast Regional Office, said that "this case is particularly troubling, not just because this appears to have been a "family business" built on insider trading, but also because the defendants include accountants and lawyers at prominent firms." He added that "these are professionals who understand their obligation not to use confidential information for their own benefit."

The complaint charged all of the defendants with illegal insider trading in violation of the antifraud provisions of the federal securities laws. In its complaint, the Commission sought permanent injunctive relief, disgorgement of all illegal profits and losses avoided, prejudgment interest and the imposition of civil monetary penalties. The complaint also sought an officer and director bar against the father. The Commission has reached an agreement with one individual defendant to settle the insider trading charges against him.