Analysts Fined for Data Collection Misconduct

Two brothers who analyzed stocks for an investment firm were fired Monday for obtaining confidential information about a San Diego drug company by enrolling in a drug trial it was conducting.

David and Doug Risk, along with Boca Raton, Fla.-based Sterling Financial Investment Group and its research chief, also were fined a total of $90,000 in connection with research on Neurocrine Biosciences Inc.

At a time when Wall Street analysts’ reputations have been sullied by allegations that tainted stock advice was widespread in the late 1990s, the Risks’ case is the first accusing analysts of using confidential information gathered during a drug trial, said Michael Shokouhi, a spokesman for NASD in Washington. NASD is the securities industry self-policing group formerly known as the National Assn. of Securities Dealers.

NASD said Doug Risk enrolled in a clinical trial for an insomnia medication being tested by Neurocrine in February. Using his brother’s name, he gathered data about the drug’s alleged deleterious effects on a patient “from a questionable source” that David, an analyst, used in a report he co-wrote on the company, NASD said.

The report also contained other “inaccurate or misleading” information, NASD said.

Regulators ordered Sterling to hire an outside consultant to review its research policies and suspended the firm’s research chief, Steven Kirsch, for 30 days. It said neither the firm nor the employees involved admitted or denied its findings.

Neurocrine Biosciences was not involved in the alleged misconduct, NASD said.

“The Risks, who exercised extremely poor judgment and were the cause of the problem, were terminated,” said Sterling spokesman Jeff Mustard.

“David and Doug both fully cooperated with the investigation,” said Andrew Cotzin, a lawyer for the Risks. “They’ve accepted this as the punishment, and it’s very much a lesson learned.”