Originally Syndicated on June 14, 2024 @ 6:03 am
Two individuals from South Florida have been charged with insider trading by the SEC. On March 17, 2020, two individuals from South Florida were indicted by the Securities and Exchange Commission for insider trading about the shares of PetMed Express, a publicly listed online pharmacy for pets located in Florida.
Who is Scott O. Hirsch?
One of the individuals who has been accused of illegal financial operations that include insider trading is Scott O. Hirsch, who resides in Delray Beach, Florida. According to the allegations, he immersed himself in a conspiracy in which he took advantage of private data about the financial state of PetMed Express, an online pet pharmacy that is traded publicly, to make illegal gains.
It was alleged that Scott O. Hirsch had obtained confidential information from top management at PetMed, which he then used for his benefit and even shared with his family members. A court settlement that includes permanent injunctions and large financial penalties was agreed with by Hirsch, although he did not confess to the claims. This compensation reflects Hirsch’s participation in unethical business activities.
An Introduction to PetMed Pharmacy
The online pet pharmacy PetMeds, run by PetMed Express, Inc. of the United States, is no stranger to controversy. This publicly listed corporation sells nutritional supplements, prescription and over-the-counter pet medicines, and is often criticized for cutting into the income of local doctors. Veterinary clinics that depend heavily on prescription sales have said that PetMed Express, doing business as 1800PetMeds, is to blame for their client’s financial woes.
Even while PetMed Express markets itself as an easy-to-use online pharmacy, it has come under fire for the way it competes. Traditional veterinarian services are seen as being directly threatened by the company’s vast product range, which includes around 3,000 stock-keeping units of pet medications and supplies.
Some of the most well-known pharmaceuticals offered by PetMed are Rimadyl, Frontline Plus, Advantage II, K9 Advantix II, Sentinel, Revolution, and Heartgard Plus. There are concerns about PetMed’s quality control and customer service since the company relies on third parties to drop-ship various pet items.
These products include food, beds, crates, and strollers. The company’s strong competition with local vets for pet owners’ business has prompted concerns across numerous states, including Georgia, Florida, Texas, New York, Virginia, and California.
SEC Allegations Against Scott O. Hirsch
Two Men from South Florida Face SEC Charges for $575,000 in Insider Trading Profits
Two Floridians from Delray Beach were indicted by the SEC on insider trading charges related to PetMed Express on March 17, 2020. PetMed Express is a publicly listed online pharmacy for pets located in Florida.
Senior management at PetMed allegedly shared private facts on the company’s quarterly results, business operations, and financial performance with Scott O. Hirsch and Kenneth L. Friedman, according to the SEC’s complaint.
Before PetMed’s official earnings announcement on May 8, 2017, the senior management divulged this confidential information on the company’s fiscal 2017 fourth quarter and year-end financial performance to Hirsch and Friedman. Hirsch then sent suggestions to his family and Friedman used this confidential knowledge to sell PetMed shares.
A permanent injunction against breaching Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 was agreed to by both persons without admitting or disputing the SEC’s claims. Hirsch was ordered to pay a total of $95,472 in civil penalties, $9,585 in prejudgment interest, and $74,536 in disgorgement. As part of the settlement, Friedman paid a civil penalty of $501,697, $64,517 in prejudgment interest, and disgorgement of $501,697.
With the help of trial lawyer Robert K. Levenson, the current inquiry is being spearheaded by Jordan A. Cortez and overseen by Jessica M. Weissman and Glenn S. Gordon. The SEC would like to thank the Financial Industry Regulatory Authority for their assistance in this case.
Verified Claims
- Confidential information about PetMed’s financial performance, quarterly profits, and company operations was accessible to the senior management.
- The policy barring insider trading at PetMed was known to the top management.
- Scott O. Hirsch was informed by the senior manager of private information about PetMed’s financial performance for the fiscal year 2017 and its fourth quarter.
- Kenneth Friedman was informed by the senior manager of PetMed’s fiscal 2017 fourth quarter and year-end financial results, which included sensitive information.
PetMed Express and the SEC Reached a $1.2 Million Settlement in Their Insider Trading Case
In a settlement of charges related to trading on inside knowledge on the financial performance of PetMed Express Inc., an online pet pharmacy, a Florida advertising executive and the head of a New York insurance business have consented to pay over $1.25 million.
Civil settlements with Scott O. Hirsch and Kenneth Friedman were disclosed in federal court files in West Palm Beach, Florida, by the Securities and Exchange Commission.
An ex-upper-level manager at PetMed allegedly tipped off both guys.
Kenneth Friedman will fork up more than $1 million, while Scott O. Hirsch will fork over roughly $180,000.
Knowing Insider Trading
People who have access to nonpublic, substantial information about a public business might be accused of insider trading if they trade the firm’s shares or other securities. The time and place of the trade determine whether insider trading is lawful in that nation. U.S. law imposes heavy fines on anybody caught trading on substantial nonpublic knowledge.
Using nonpublic knowledge to trade stocks in a way that might affect the company’s stock price is known as illegal insider trading. An investor may gain an unfair advantage over the public if this information were known and used to influence their choice to purchase or sell stocks. Illegal insider trading may have devastating effects, as shown in high-profile incidents like Martha Stewart’s 2001 ImClone transaction. The SEC has requirements that legal insider trading must follow.
Conclusion
The harsh repercussions of insider trading and the SEC’s stringent enforcement measures are shown in the case against Scott O. Hirsch and Kenneth L. Friedman. The two guys made $575,000 in illicit gains by using proprietary information about PetMed Express’s financial performance that they stole from top management of the firm.
While neither Scott O. Hirsch nor Friedman admitted or denied the charges, they did agree to permanent injunctions against future violations of federal securities laws, which resulted in substantial financial penalties due to the SEC’s prompt action. The SEC’s dedication to maintaining honest markets and protecting investors from unfair practices like insider trading is on full display in this instance.
In addition, it’s a good warning that insider trading may lead to serious legal and financial consequences for anyone involved. The substantial consequences of engaging in such unethical acts are shown by the settlements, which total about $1.25 million. This highlights the need to strictly follow securities legislation.
