|Monday, October 28, 2002
Nancy A. Condon 202-728-8379
Michael Shokouhi 202-728-8304
NASD Fines and Suspends Research Analyst for Misusing Confidential Information Obtained in Clinical Drug Trial; Sterling Financial and Others Also Sanctioned for Misleading and Inaccurate Research Reports
Washington, D.C. — NASD today announced that it has fined and suspended David Risk, a research analyst, and his brother, Doug Risk, a research associate, both formerly employed by Sterling Financial Investment Group of Boca Raton, FL. The Risk brothers violated NASD rules in connection with their gathering and use of confidential information in a research report relating to ongoing clinical trials for a new sleep medication. Sterling was also fined and Steven Kirsch, the head of Sterling's research department, was fined and suspended.
David Risk was suspended for eight months and fined $35,000. Doug Risk was suspended for five months and fined $5,000. Sterling was fined $40,000 and was ordered to retain an outside consultant to review the firm's policies and procedures concerning its research department. Kirsch was fined $10,000 and suspended as a principal and supervisor for 30 days.
NASD found that David Risk and Doug Risk violated NASD rules in obtaining information about Neurocrine Biosciences, Inc., a company David Risk was researching for Sterling. In early Feb. 2002, David Risk made an appointment at a clinic performing clinical trials of a medication to treat insomnia being developed by Neurocrine. On the day of the appointment, David Risk directed his brother, who was then acting as his assistant, to go to the clinic and portray himself as David Risk. Doug Risk did so and represented himself as David Risk, signed documents in the name of his brother, and completed a physical examination in the name of David Risk.
Doug Risk wrote David Risk's name on a registration sheet at the clinic that contained a confidentiality agreement. The agreement required that signatories not divulge the name of any patient or family participating in any clinic program. The statement further required him to keep any and all treatment information concerning patients or their families "in the strictest confidence."
In the course of portraying himself as his brother, Doug Risk obtained information, including confidential information, about the medication being studied and the clinical trials. This included information obtained from a questionable source with no personal knowledge of the events about a patient who allegedly could not be roused after taking the medication being tested on behalf of Neurocrine.
Despite the existence of the confidentiality agreement, Doug Risk told his brother what he learned at the clinic. David Risk did nothing to verify the accuracy of the information and included it in a research report he co-wrote about Neurocrine, which was issued to customers and potential customers of Sterling on Feb. 20, 2002. The report contained other material written by David Risk that was inaccurate or misleading. David and Doug Risk were also charged with violating NASD rules by failing to advise Sterling, in writing, of accounts they had at other firms. Doug Risk made trades in one of those accounts, including trades in stocks Sterling was following, without notifying Sterling of the trades.
Sterling was fined for having inadequate training and written supervisory procedures for its research department. Sterling and Kirsch were sanctioned for failure to supervise the activities of the firm's research department and research analysts. Actual supervision of the research department was minimal, and there was inadequate review of the activities of the analysts and department staff. In settling this case, the respondents neither admitted nor denied the findings made by NASD.
Neurocrine Biosciences, Inc. had no involvement in any of the misconduct that is the subject of today's enforcement action.
Investors can obtain more information about NASD as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD's Web site, www.nasd.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business -- from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit www.nasd.com.