In an eye-opening press release today, the SEC announced that it has charged a former managing director of The NASDAQ Stock Market with insider trading. The SEC alleges in its complaint that the former director, Donald L. Johnson, learned confidential information that he later traded on through his employment in the NASDAQ market intelligence unit. This unit was responsible for communicating with companies in advance of market-moving public announcements such as corporate leadership changes, earnings reports and forecasts, and regulatory approvals of new pharmaceutical products.

The SEC alleges that Johnson traded in nine different securities based on the confidential information he learned in his position at NASDAQ, profiting more than $755,000 during a three-year period. Robert Khuzami, Director of the SEC's Division of Enforcement, called the case "the insider trading version of the fox guarding the henhouse.” As a NASDAQ employee, Johnson was required to hold such information in confidence, the SEC stated, and he even "assured at least one corporate official that she could share material nonpublic information with him because he was obligated as a NASDAQ employee to hold such information in confidence." The DOJ also announced today that it has charged Johnson in a parallel criminal action.

In one instance, the SEC alleged, Johnson spoke by phone on October 30, 2007, with executives at United Therapeutics Corp. (UTHR), including the CFO and general counsel. In this call, Johnson allegedly learned of the successful completion of a trial for the company's drug Viveta (later renamed Tyvaso), and purchased 10,000 shares of UTHR stock in his wife's brokerage account on October 31, 2007. The SEC says that after UTHR issued a press release the next day announcing the successful trial results, Johnson began selling the UTHR stock online from his office computer, and made profits of approximately $175,000.