SEC, FDA Formalize Information-Sharing to Boost Enforcement
A new memorandum of understanding creates a formal channel for the SEC to obtain nonpublic FDA information, increasing enforcement risks for life sciences companies regarding investor disclosures and insider trading.
The US Securities and Exchange Commission (SEC) and Food and Drug Administration (FDA) have signed a memorandum of understanding (MOU) to formally govern the sharing of nonpublic information. This agreement establishes a clear channel for the SEC to access confidential data related to FDA-regulated products and companies.
Sophisticated counsel and their life sciences clients care because the MOU signals the SEC's intent to increase scrutiny of public statements regarding clinical trials, regulatory submissions, and product approvals. With direct access to FDA records, the SEC's Divisions of Enforcement and Corporation Finance can more easily identify misleading or incomplete disclosures. The framework also enhances the SEC’s ability to build insider trading cases by precisely timing trades against the receipt of material nonpublic information from the FDA.
Companies should review their disclosure controls, insider trading policies, and procedures for documenting interactions with the FDA. Counsel should expect an uptick in SEC inquiries and enforcement actions targeting pharma and biotech issuers, making robust compliance and careful record-keeping more critical than ever.