Insider Trading in the Clinical Trial Setting

106 Pages Posted: 14 Sep 2022 Last revised: 30 Sep 2022

Date Written: September 12, 2022


Insider trading is always on the Securities and Exchange Commission’s enforcement agenda. Every year these cases include charges of trading based on material nonpublic information regarding a clinical drug trial conducted to obtain approval to market a new drug. Almost half of those cases are accompanied by a criminal indictment, sometimes leading to incarceration. The time is ripe for a comprehensive analysis of how the law of insider trading applies to the important endeavor of clinical drug trials.

This Article presents the basic principles of insider trading, including cases involving information about trials of pharmaceuticals. It then describes how clinical trials are conducted and regulated and the ways in which nonpublic information material to the stock price of the sponsor of the trial may be used to trade or tip.

The analysis that follows identifies a number of situations where use or disclosure of material nonpublic information about a trial has been found to be or could, applying existing principles, be unlawful. Employees of sponsors of the trial, clinical investigators, and the subjects participating in a trial could run afoul of the prohibition on insider trading, such as when information has been used in breach of a confidentiality agreement or exchanged between an investigator and a trial participant, exchanged among trial participants, gleaned from attending medical conferences, and obtained in other settings specific to this industry. Presenting the full potential reach of the law facilitates conforming conduct to avoid violating the law.

Keywords: Insider Trading* Materiality, Principal investigator, IRB, Rule 10b-5* Clinical trial* Clinical drug trial* FDA approval

JEL Classification: K10, K19, K30, K39

Suggested Citation

Horwich, Allan and Brawley, Crista, Insider Trading in the Clinical Trial Setting (September 12, 2022). Northwestern Law & Econ Research Paper No. 22-12, Available at SSRN:

Allan Horwich (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

ArentFox Schiff ( email )

233 S. Wacker Drive
Suite 7100
Chicago, IL 60606-6473
United States

Crista Brawley

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
3125031686 (Phone)

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