Parallel Enforcement: SEC Authorities and How They Can Impact FDA’s Civil and Criminal Enforcement

Luke Cadigan & Sonia Nath


Life sciences companies frequently must determine what information to communicate to investors about key developments in clinical trials or the U.S. Food and Drug Administration’s (FDA) regulatory review process. Although the details of a company’s interactions with FDA during its approval process are not public, the valuation of a life science company often depends on its ability to bring a drug or device to market, making information about the likelihood of the FDA approval critical to investors. The decision of whether to disclose this information is further complicated in instances where a company has incomplete information. For example, a publicly traded pharmaceutical company may only have partial results from a pivotal clinical trial. When deciding what (if anything) to say in such circumstances, the company’s disclosures will be scrutinized for accuracy and completeness by a separate regulatory agency—the U.S. Securities and Exchange Commission (SEC or the Commission). Should SEC conclude that the company’s disclosures were inaccurate or misleading, the consequences of enforcement may be severe, including prohibiting individuals from serving as a director or officer at a publicly traded company, substantial financial sanctions, and, in extreme cases, referral to the U.S. Department of Justice (DOJ) for criminal prosecution.

This Article analyzes the interplay between the SEC and the FDA regulatory regimes concerning life science companies. Part II provides an overview of the FDA enforcement powers. Part III summarizes the SEC regulatory framework and the SEC enforcement actions that may specifically target the FDA-regulated companies. Part IV analyzes the circumstances in which these agencies act in conjunction with each other to enforce their various statutes and regulations and provides several examples of companies that have experienced such parallel enforcement.