A former mutual fund portfolio manager with U.S. Bancorp, now known as FAF Advisors, settled charges by the Securities and Exchange Commission that he accessed non-public information on shares of XOMA that prompted him to sell all 332,000 of his shares, worth $2.5 million. Joe Frohana, manager of the First American Investment Fund, allegedly accessed a report on a drug that XOMA and Genetech were jointly developing that his brother was conducting. The purpose of the study was to determine if the drug had bio-equivalence. Frohana’s brother informed him on April 3, 2002 that the results were negative. On the following day, Frohana sold all of his shares. The next day, when the two biotechnology companies made the information public, the stock plummeted 42%, which would have hit Frohana’s fund with a $954,776 loss. Without admitting to or denying the allegations, Frohana consented to the SEC’s findings that he is permanently prohibited from violating antifraud provisions of the federal securities laws and must pay $954,776 in disgorgement, plus $325,286.57 in interest, as well as a civil penalty of $954,776.
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