The Trial Balance is CFO.com’s weekly preview of stories, stats and events to help you prepare.
Part 1 — A former investment analyst faces charges in a pair of parallel insider trading cases.
A “sophisticated investment professional with healthcare expertise” is alleged to have netted over $300,000 through insider trading.
That’s according to charges filed June 5 by the Securities and Exchange Commission. In a complaint, the SEC said JianQing Li traded in the securities of at least a dozen healthcare companies using “confidential information obtained from his employer.”
The SEC identified Li’s employer only as “a registered investment adviser focused on the healthcare sector” based in New York. The complaint alleged that Li used secret information to trade for himself.
“The pattern was the same every time. His employer would receive confidential information about a healthcare company, including the terms of an upcoming private placement, the results of a clinical drug trial, or both,” the complaint stated. “Li was included on the communications through which his employer received that information. Before the information became public, Li traded in that company’s securities, buying when the news was favorable and selling short when it was not.”
The complaint went on to say that Li kept such trading hidden from his employer, which had written policies that forbade trading in healthcare securities. Li “never sought preclearance for any trade or disclosed his personal brokerage accounts to his employer,” the SEC’s complaint said.
The SEC detailed how Li allegedly took advantage of a practice known as “wall-crossing,” where an investment bank offers to share confidential information about an upcoming securities offering with an adviser on the condition that the adviser keeps it secret and uses it “only to decide whether to participate in the offering,” per the complaint.
Such information could include things such as an issuer’s identity, the timing of an offering or data from clinical drug trials, the complaint said.
The document noted that Li was included in wall-cross communications and received confidential information directly.
Even when an issuer was on his employer’s restricted trading list, the SEC said, Li traded in that issuer’s securities through his own personal brokerage account or the account called “Hexa,” which was an LLC he controlled.
“When the issuer publicly disclosed the confidential information, the stock price moved sharply, rising on positive news or falling on negative news,” the complaint said. “Li then closed his position for a profit.”
Li also faces charges in a parallel criminal case brought by U.S. Attorney for the Southern District of New York Jay Clayton. That case charges Li with two counts of securities fraud and pegs his total illegal trading profit at more than $350,000.
Neil Peter Kelly, who’s listed as defense attorney for Li in the criminal case, didn’t immediately respond to an emailed request for comment on Monday morning.
Part 2 — This week
Here’s a list of important market events slated for the week ahead.
Monday, June 8 — None scheduled.
Tuesday, June 9
Wednesday, June 10
- Consumer price index, May
- CPI core, May
Thursday, June 11
- Initial jobless claims, week ending June 6
- Producer price index, May
Friday, June 12
- University of Michigan Consumer Sentiment, June preliminary
Part 3 — Quote of the week
“Learn to communicate like a leader, not an accountant. A lot of people can talk numbers, but they can’t clearly define a complex problem for somebody who’s not an accountant. It’s important to be able to take that complex challenge and present it in an easily relatable way.”
Christy Totin
CFO, Net Health
Christy Totin, the CFO of healthcare software firm Net Health, discusses what advice she would give to others hoping to become CFOs, how she made a career shift from apparel retail to SaaS and the benefits of being Six Sigma Green Belt-certified.
