Former Nasdaq Exec Charged With Insider Trading

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A former managing director of the Nasdaq Stock market was charged Thursday with insider trading.

The Securities and Exchange Commission said Donald L. Johnson used his position as a Nasdaq executive to steal confidential information and timed trades to profit from important announcements by publicly traded companies.

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Johnson allegedly traded ahead of public announcements with the potential to move a stock such as corporate leadership changes, earnings reports and forecasts, as well as regulatory approvals of new pharmaceutical products.

The complaint says Johnson frequently placed illegal trades directly from his work computer through an online brokerage account in his wife’s name. Over three years, Johnson allegedly collected more than $755,000 in illegal profits.

Johnson has also been charged by the Department of Justice in a criminal complaint.

“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, the SEC’s director Division of Enforcement, said in a statement.  “Instead of protecting Nasdaq client confidences, Johnson secretly traded on client information for personal gain, even using his Nasdaq office computer to make the trades.”

According to the complaint filed in federal court in Manhattan, Johnson illegally traded in advance of nine announcements involving Nasdaq-listed companies from August 2006 to July 2009.

The SEC claims Johnson had “frequent and significant interactions” with senior executives of Nasdaq-listed companies, including CEOs, CFOs, and investor relations officers.

For example, Johnson allegedly reaped $175,000 in illegal profits through insider trading in the stock of United Therapeutics Corp. (NADAQ:UTHR).

Johnson allegedly spoke by phone with United Therapeutics on Oct. 30, 2007, and learned of the successful completion of a trial for one of its drugs.  A day later he purchased 10,000 shares of the company’s stock in his wife’s brokerage account, according to the complaint.

After the company issued a press release on November 1 announcing the successful trial results, Johnson began selling the stock he had purchased the day before, placing sell orders online from his office computer at Nasdaq, the SEC charged.

Johnson worked for Nasdaq for 20 years before retiring in September 2009. His wife Dalila Lopez was also named as a defendant in the complaint so that the SEC can recover illicit profits still in her possession.

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