Shkreli Dodges Securities-Industry Bar Order

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By Phyllis Diamond

Former pharmaceutical executive Martin Shkreli’s convictions for lying to his hedge fund’s clients could send him to prison for up to 20 years, but standing alone, they’re not enough to bar him from the securities industry.

The Securities and Exchange Commission Enforcement Division is entitled to summary judgment on the question of whether Shkreli was convicted of a felony involving securities within the past 10 years, an SEC administrative law judge said Nov. 17 in a so-called follow-on proceeding ( In Shkreli , S.E.C., Admin. Proc. File No. 3-18127, 11/17/17 ).

However, the division didn’t make two other showings required under the 1940 Investment Advisers Act to support an industry bar, ALJ James Grimes said:

  •  that Shkreli was associated with an investment adviser at the time of his misconduct; and
  •  that barring him from the industry would serve the public interest
Shkreli—who has been described variously as “Pharma Bro” and “the most hated man in America”—was convicted in August on three counts of securities and wire fraud and acquitted on five other charges. In the administrative proceeding that followed, the ALJ largely denied the Enforcement Division’s motion for summary disposition.

As to Shkreli’s association with an investment adviser, Grimes said it’s possible that the jury based its convictions solely on Shkreli’s conduct and in 2013 and 2014, whereas Shkreli’s investigative testimony establishes his association with an investment adviser only through 2012.

As to the public interest, Grimes said, the division primarily relied on the superseding indictment and the jury verdict, but didn’t show what the jury necessarily decided when it convicted Shkreli.

The commission has said that summary disposition rarely will be inappropriate in cases involving a fraud conviction, the ALJ said. Nonetheless, Grimes said, a conviction doesn’t automatically result in an industry bar—"otherwise there would be no need for this proceeding.” Rather, “an individual assessment of the public interest in each case is required.”

To contact the reporter on this story: Phyllis Diamond in Washington at

To contact the editor responsible for this story: Seth Stern at

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