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New York Attorney General Institutes Insider Trading Action Under Martin Act
01/27/2026On January 15, 2026, the New York Attorney General (“NYAG”) filed a complaint against a former life-sciences manufacturing CEO alleging violations of New York’s Martin Act for trading material nonpublic information related to the manufacturing of Covid-19 vaccinations.[1] The NYAG’s complaint against the former CEO was filed on the same day it announced a settlement with the life-sciences manufacturer for its approval of the former CEO’s Rule 10b5-1 trading plan.
Manufacturing of Covid-19 VaccineAs alleged by the NYAG, beginning in May 2020, the U.S. federal government undertook an initiative known as Operation Warp Speed in which it sought to support the rapid development of Covid-19 vaccine candidates. In June and July 2020, the life-sciences manufacturer entered into two agreements with a global biopharmaceutical company to provide development and manufacturing services for the vaccine candidate, with the agreements valued at $87 million and $174 million, respectively. Following the manufacturers’ public announcement of these contracts in June and July 2020, its stock price doubled over the course of two months.
However, beginning in September 2020, the manufacturer allegedly found contamination in the production of the vaccine, and in November 2020, the parties slowed production due to the contamination. According to the complaint, the life-sciences manufacturer did not disclose any concerns with its manufacturing of the vaccine candidate in either its Q3 2020 SEC filings or quarterly reports.
Response in Stock PriceThe NYAG alleges that as the life-sciences manufacturer recognized its problems with contamination, its CEO engaged a New York-based investment adviser to seek advice on entering into a 10b5-1 trading plan. The trading plan in this instance would result in the CEO’s exercise of his company’s stock options for a pre-arranged strike price. The draft trading plan included a “cooling off period,” in which the CEO would not be able to exercise his stock options for a period of 60 days if the stock was trading above $100. In November 2020, the CEO executed the trading plan, which initiated the cooling off period. As alleged in the NYAG’s complaint, the CEO entered into the trading plan while in possession of material non-public information related to his company’s development and contamination of the Covid-19 vaccination, and in particular, the CEO was regularly informed about the contamination and its impact on the manufacturer’s ability to meet delivery targets.
Insider Trading AllegationsThe complaint alleges that the CEO exercised five stock sale options with knowledge of material nonpublic information, between January 15 and February 8, 2021, collectively receiving $10,121,079.50 in total proceeds from the exercise and sale of stock options.
Following a February 18, 2021 investor call in which the life-sciences manufacturer faced questions about its slow production of vaccines, its stock price dropped by approximately 12%. Ultimately, following an investigation of the life-sciences manufacturer’s facility, the Food and Drug Administration halted its production on April 19, 2021, which allegedly resulted in the stock price falling an additional 15%.
The Life-Sciences Manufacturer’s SettlementOn the same day it took action against the former CEO, the NYAG announced it had reached an assurance of discontinuance with, and otherwise settled, its investigation into the life-sciences manufacturer. In settling the action, the NYAG alleged the life-sciences manufacturer was aware of the unresolved manufacturing and contamination problems at its plant and of its’ CEO’s awareness of these problems and nevertheless approved the trading plan. Although the manufacturer did not make affirmative admissions in the settlement agreement, a representative on behalf of the company signed the settlement which states, that its actions “violated the Martin Act, General Business Law § 352-c and 353, and Executive Law § 63(12).”[2] In addition to the life-sciences manufacturer agreeing to revise its insider trading policy and trade pre-clearance forms, it has agreed to pay $900,000 to the State of New York, where neither it, nor its CEO resided at the time of the alleged insider trading.
State Enforcement of Insider TradingThis insider trading action brought by a state attorney general is a helpful reminder that most states have adopted prohibitions equivalent to the most commonly enforced federal fraud and insider trading statutes. Even as the Securities and Exchange Commission and Department of Justice are purportedly resource constrained or prioritizing other types of enforcement actions, state attorneys general have the statutory tools needed to bring many types of white collar cases, including insider trading.
Footnotes
[1] Attorney General James Sues Former CEO of Emergent BioSolutions for Insider Trading, Office of the New York State Attorney General (Jan. 15, 2026), https://ag.ny.gov/press-release/2026/attorney-general-james-sues-former-ceo-emergent-biosolutions-insider-trading; N.Y. Gen. Bus. Law § 352-c (McKinney 1996).
[2] In re Investigation of Emergent BioSolutions, Inc., Assurance No. 26-001 at 7 (Jan. 15, 2026), https://ag.ny.gov/sites/default/files/settlements-agreements/emergent-biosolutions-inc-assurance-of-discontinuance-2026.pdf.
