Feds Turn To Healthcare Stocks In Insider Probe

Feb 29 2012 | 4:32am ET

Technology stocks have dominated the insider-trading cases brought in the U.S. over the past two years. But they're set to play second fiddle to a new star industry for illegal tipping.

Trading in and on confidential information about pharmaceutical and biotechnology companies is now "front and center" of the U.S. Justice Department investigation, the Financial Times reports. Authorities are looking into hedge funds trading around major announcements by such companies.

Earlier this week, the Federal Bureau of Investigation said it was investigating about 250 people for insider-trading, about half of whom it hoped to build criminal cases against.

A focus on insider-trading in pharmaceuticals and biotech is not entirely new: Last year, two men pleaded guilty in an insider-trading scam that helped sink FrontPoint Partners, including that hedge fund's former top healthcare manager, Joseph Skowron. Also last year, Massachusetts authorities sued hedge fund Risk Reward Capital Management for trading on confidential information received from expert network consultants.

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