SEC Charges Former Attorney at U.S.-Based Global Law Firm with Insider Trading

The Securities and Exchange Commission has recently made public its allegations against Romero Cabral da Costa Neto, accusing him of engaging in insider trading activities. Costa, a visiting attorney hailing from Brazil, was associated with a global law firm during the relevant period.

According to the filed complaint by the SEC, in the year 2023, while serving as a visiting attorney at the aforementioned law firm, Costa gained unauthorized access to confidential information pertaining to the firm’s involvement in the acquisition of CTI BioPharma Corp. (CTIC) by the biopharmaceutical company Swedish Orphan Biovitrum AB. The complaint asserts that on May 9, 2023, just prior to the official announcement of the deal, Costa acquired over 10,000 shares of CTIC. Subsequently, he allegedly divested these shares on the day of the public announcement, thereby violating both securities laws and the internal policies of the law firm. This unauthorized trading activity resulted in a profit exceeding $42,000. The SEC’s complaint also outlines instances where Costa engaged in trading activities involving other issuers represented by the same law firm, occurring around the time of significant announcements by these companies.

Nicholas P. Grippo, the Regional Director of the Philadelphia Regional Office, expressed, “The allegations in our complaint point to Costa’s exploitation of his position for personal gain, thus breaching his responsibilities towards the law firm and its clients.” He went on to emphasize that lawyers are often privy to sensitive and confidential data about their law firms’ clients who are public companies. Grippo noted that instances of lawyers abusing this privileged access, as allegedly done by Costa, will be met with swift action to ensure accountability. The SEC’s timely response was enabled by the diligent efforts of its staff, ensuring that Costa would face the consequences of his alleged insider trading activities.

The origin of this case can be traced back to the SEC’s Market Abuse Unit’s Analysis and Detection Center, a division that employs advanced data analysis tools to identify suspicious trading patterns. As a result of their findings, the SEC forwarded the matter to the U.S. Attorney’s Office for the District of Columbia, which subsequently brought forward parallel criminal charges against Costa.

In accordance with the allegations presented, the SEC has initiated legal proceedings by filing a complaint in the U.S. District Court for the District of Columbia. The charges against Costa involve violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, specifically relating to antifraud provisions. The relief sought by the SEC includes injunctions, disgorgement with prejudgment interest, and the imposition of civil penalties.