- Thursday, September 8, 2005
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INSIDER TRADING AND CLINICAL TRIALS By Donald F. Crane* We are asked regularly about guidelines as to when it is appropriate to buy or sell stock in a public company. One context in which this often comes up is during clinical trials conducted by life sciences companies. In view of recent attention by the Congress and the SEC (see New York Times August 9, 2005), we thought it would be useful to call your attention to this important subject. Insider Trading in Clinical Trials In general, a person may not buy or sell stock in the public markets when aware of material information that is not available to the public and has been gained through a confidential relationship. Illegal insider trading occurs by use of inside knowledge to gain a trading advantage – profiting or avoiding losses – to the detriment of the rest of the market that does not yet have access to this information. Starting with a few basic, but important, concepts: Information is material if it would be considered important in the total mix of information a reasonable investor would consider in making an investment decision.