SEC v. Bankosky

As a senior employee of Takeda Pharmaceuticals International, Inc. (Takeda), Brent C. Bankosky (defendant) obtained inside information that Takeda was discussing potential transactions with other companies. Bankosky then bought call options in the shares of the other companies. After the transactions were publicly announced, Bankosky sold the options and made a profit. The Securities and Exchange Commission (SEC) (plaintiff) filed an enforcement action, accusing Bankosky of insider trading in violation of Section 10(b) and Section 14(e) of the Securities Exchange Act of 1934. The SEC motioned for an injunction barring Bankosky from serving as an officer or director of any publicly traded company. The district court assessed Bankosky’s fitness to serve as an officer or director by considering various factors. The district court found that Bankosky’s conduct was not highly egregious and that Bankosky had no history of violating securities laws. However, the court determined that Bankosky acted as a fiduciary for Takeda’s shareholders, knew that the insider trading was illegal, had a financial interest in the insider-trading activity, and would not guarantee that Bankosky would refrain from future securities-law violations. After balancing the various factors, the court concluded that Bankosky was unfit to serve as an officer or director of a publicly traded company and banned Bankosky from doing so for a period of 10 years. Bankosky appealed.