DOJ and SEC Charge Healthcare Executive With Insider Trading Through a Rule 10b5-1 Trading Plan, Marking DOJ’s First Such Indictment

On March 1, 2023, the U.S. Department of Justice and the Securities and Exchange Commission announced insider trading charges against Terren Peizer, the CEO and Chairman of a California-based healthcare services company called Ontrak, Inc. (the “Company”) for allegedly selling Company securities while in possession of material, non-public information (“MNPI”) that one of the Company’s major customers was likely to cancel its contract. 

When the news was disclosed, the Company’s stock dropped dramatically, and by trading ahead of the news, Peizer allegedly avoided more than $12.5 million in losses.  This is the first time the DOJ has brought criminal charges for insider trading based solely on an executive’s use of a Rule 10b5-1 trading plan, which provides an affirmative defense to insider trading through the use of a trading plan adopted when the trader is not in possession of MNPI. 

The SEC announced charges against Peizer and his personal investment vehicle, Acuitas Group Holdings, LLC (“Acuitas”), in a parallel civil action the same week that recent SEC amendments to Rule 10b5-1 became effective.

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