The SEC today charged former MD of The Nasdaq Stock Market with insider trading on confidential information that he stole while working in a market intelligence unit that communicates with companies in advance of market-moving public announcements.  Donald Johnson allegedly traded in advance of public announcements, such as corporate leadership changes, earnings reports and forecasts, and regulatory approvals of new pharmaceutical products.  He often placed the illegal trades directly from his work computer through an online brokerage account in his wife’s name.  Johnson obtained illicit trading profits of more than $755,000 during a 3-year period.

Johnson also has been charged in a parallel criminal action announced by the U.S. Department of Justice today.

    Profile of Donald Johnson.    Johnson lives in Ashburn, VA, and worked in various positions for NASD and Nasdaq for 20 years until his retirement from Nasdaq in September 2009.   Johnson worked in Nasdaq’s Corporate Client Group (CCG) from January 2000 to October 2006.  He then transferred to the Market Intelligence Desk, a specialized department within the CCG that provides issuers with general market updates, overviews of their company’s sector, and commentary regarding the factors influencing day-to-day trading activity in their stocks.

    SEC's Allegations in Filed Complaint.    In its complaint filed in U.S. District Court for the Southern District of New York, the SEC charged that Johnson illegally traded in advance of 9 announcements involving Nasdaq-listed companies from August 2006 to July 2009.  He took advantage of both favorable and unfavorable information that was entrusted to him in confidence by Nasdaq and its listed company clients, shorting stocks on several occasions and establishing long positions in other instances. 

Johnson apparently had frequent and significant interactions with senior executives of Nasdaq-listed issuers - CEOs, CFOs, IR officers at his assigned companies.   The corporate executives shared nonpublic information with Johnson based on the understanding that it would be kept confidential and that Johnson could not use the information for his personal benefit. 

One Trade Scenario.   Johnson allegedly earned $175K in illicit profits by trading in the stock of United Therapeutics Corp. (UTHR).  He spoke by phone with company executives on 10/30/07 and became aware of the successful completion of a trial for its drug Viveta - later renamed Tyvaso.  Despite the nonpublic and highly confidential nature of the Viveta trial results discussed with him, Johnson purchased 10,000 shares of UTHR stock in his wife’s brokerage account one day later, on 10/31/07.  After UTHR issued a press release on 11/1/07, announcing the successful trial results, Johnson began selling all of the stock that he had purchased the day before, placing sell orders online from his office computer at NASDAQ.

The SEC seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest and a monetary penalty.   Johnson’s wife Dalila Lopez is named as a relief defendant.   For further details, go to:   [SEC PR 11-117, 5/26]