UPDATE 3-US authorities charge healthcare company Ontrak's boss with insider trading

(Adds comment from SEC official, defense attorney) By Douglas Gillison and Kanishka Singh WASHINGTON, March 1 (Reuters) - U.S. authorities on Wednesday charged the head of the health care company Ontrak Inc with insider trading, marking the first criminal case involving the use of a special trading plan designed to help shield executives from such charges. Ontrak Chairman and CEO Terren Peizer sold more than $20 million of Ontrak stock between May and August 2021 while in possession of material non-public negative information related to the company's largest customer, authorities said. In a statement, U.S. Assistant Attorney General Kenneth Polite called the charges a "groundbreaking" effort to prevent the misuse of so-called 10b5-1 trading plans. The U.S. Securities and Exchange Commission also announced civil insider trading charges against Peizer in a parallel action. Gurbir Grewal, the SEC's director of enforcement, said abuse of 10b5-1 plans "erodes public confidence" and that his agency was ready to bring further cases if necessary. "It's an area we are definitely looking at and concerned about," he told reporters on the margins of an industry conference on Wednesday.

Peizer's trading arrangement's helped him avoid more than $12.5 million in losses, according to the Justice Department. David Willingham, an attorney for Peizer, said his client was innocent and that U.S. authorities had disregarded good-faith discussions held "before these cases were filed without any prior notice." Executives can use trading plans under rule 10b5-1 as a defense against insider trading charges by planning to sell shares in advance at predetermined times.

But the prearranged stock selling programs have come under criticism in response to a growing body of academic research indicating some executives have used them for suspiciously well-timed trading. Federal prosecutors and SEC officials have launched a widespread investigation into potential abuses of such plans, according to two sources familiar with the matter. In a recent case, the SEC in September charged Cheetah Mobile Inc's CEO and its former president with insider trading in connection with a trading plan. The SEC in December voted to make changes to the insider trading programs to address concerns over abuse. (Reporting by Douglas Gillison and Kanishka Singh in Washington and Chris Prentice in Miami; editing by Diane Craft)

Reuters

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UPDATE 3-US authorities charge healthcare company Ontrak&apos;s boss with insider trading

By Reuters

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UPDATE 3-US authorities charge healthcare company Ontrak's boss with insider trading