SEC Charges Doctor with Tipping

Yves M. Benhamou, M.D., a French doctor and medical researcher, has been charged by the Securities and Exchange Commission (SEC) of breaking security laws by tipping a hedge fund manager with confidential information with respect to a clinical trial in which he was involved.

 

The SEC has brought about the allegation against Dr. Benhamou that he had breached his code of confidentiality to the Human Genome Science, Inc. (HGSI) by illegally tipping negative details — which was yet not out in the public domain —about a clinical trial for the drug Albumin Interferon Alfa 2-a (Albuferon), a potential drug that can be used for the treatment of Hepatitis C. No public announcement had been made by the company till that time. Dr. Benhamou has been a member of the Steering Committee which was overseeing the clinical trial of HGSI and while serving on this Committee, he had been providing consultancy services to the said manager.

 

Pursuant to this, in a criminal proceeding, the US Attorney's Office for the Southern District of New York has announced criminal proceedings against Dr. Benhamou. He has been charged with violating the anti-fraud provisions set down in the Federal securities laws. The SEC which is looking into the matter is seeking a permanent injunction, disgorging all any ill-gotten gains with prejudgment interest, and a hefty financial penalty against the doctor.

 

In a related development, a Wall Street Journal article has identified that FrontPoint Partners — a $7 billion hedge fund firm under the ownership of Morgan Stanley — is the firm for which the accused hedge fund manager worked.

 

The entire incident of breaking the code of confidentiality here stresses the need for following HIPAA in a more stringent way. HIPAA, the Health Insurance Portability and Accountability Act, protects not only confidentiality of the patients’ records but also ensures the privacy of patients’ identifiable health information. While on one hand the HIPAA Privacy Rule draws boundaries and conditions on the uses and disclosures of patient information without patient authorization, the Security Rule, on the other hand, establishes a set of national standards to protect individuals’ electronic personal health information that is created, received, used, or maintained by a covered entity in order to ensure confidentiality, integrity, and security of electronic protected health information.