SEC charges financial pro with insider trading in his company’s securities

Ferrie has agreed to settle the charges by, among other things, paying a total of over $33,000 in disgorgement of ill-gotten gains, prejudgment interest, and a civil penalty.

The SEC's complaint, filed in the U.S. District Court for the District of Connecticut, alleges that Jonathan J. Ferrie, of Prospect, Connecticut, traded in the securities of his former employer, Cigna, on the basis of material non-public information that he obtained as the financial controller of a division of Cigna's health insurance business. According to the SEC's complaint, in June 2021, Ferrie learned that his division's profitability during the second quarter of 2021 was below expectations due to unexpected increases in health insurance costs related to the Covid-19 pandemic.

The SEC alleges that Ferrie immediately purchased Cigna stock options that would be profitable to Ferrie only if Cigna's stock fell substantially in price by mid-August 2021, and Ferrie allegedly knew that Cigna would announce its quarterly financial performance by early August 2021. The SEC further alleges that, on August 5, 2021, Cigna announced higher-than-expected increases in medical costs that Cigna had to cover as its health insurance customers emerged from pandemic lockdowns -- the same metric that Ferrie had seen within his own division.

The SEC alleges that Cigna's stock price immediately dropped by 13 percent following the announcement. According to the SEC's complaint, Ferrie sold his options on the morning of the public announcement, making a profit of approximately $16,000, an approximately 236% return on the amount he had invested. The SEC alleges that Ferrie's trades violated Cigna's written policy expressly forbidding both insider trading and trading by employees in options on Cigna stock.

Without admitting or denying the allegations in the SEC's complaint, Ferrie consented to the entry of a judgment ordering a permanent injunction prohibiting him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Ferrie also agreed to pay $16,039.78 in disgorgement, $1,497.17 in prejudgment interest, and a civil money penalty of $16,039.78. Ferrie also agreed to be barred from acting as an officer or director of a public company for a period of three years. The settlement is subject to court approval.

The SEC's case was handled by Jeffrey Cook, John McCann, Michael Moran, and Celia Moore of the SEC's Boston Regional Office.

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Original tetx here: https://www.sec.gov/litigation/litreleases/lr-25830