Share this article Share Share Some of the most recent incidents of stockholders being fired for their share price violations came last week, when the CEO of a US company was dismissed for violating his company’s share price policy.
In the case of the New York City-based pharmaceutical company Pfizer, the company had been selling its stock at a high price for a short period of time.
In order to help mitigate the potential risk of price volatility, the CEO announced a two-year program in which shares would be traded at an open price and the price would increase over time.
While it was technically illegal to sell a stock at below the open price, Pfizer was required to follow a stock price benchmark established by the US Securities and Exchange Commission, which is defined as “the price at which an established price could be expected to be paid for a security in a trading day.”
The benchmark was set by a company called the S&P 500 Index.
As a result, Pfiser was required by the SEC to sell its stock to a benchmark and then pay the benchmark for each share sold.
Pfizer did not follow the benchmark, and it ended up paying the benchmark less than the price it set.
After the stock price dropped to its lowest level in more than two years, Pfizers stock price plunged below $4 per share, which was a breach of the SEC’s guidelines.
The stock price eventually recovered to about $4.70, but the SEC said it would take action against Pfizer for violating its share price benchmark.
Pfizers CEO, Paul C. Otellini, had said that he had been unaware that the stock benchmark was a requirement of the S &p 500 Index, and the company did not disclose this fact to its investors.
The SEC did not immediately respond to Business Insider’s request for comment.
The CEO of another US company, Aetna, was also fired over his share price violation.
AetraMed, which owns the WellPoint and Cigna insurance plans, was one of the companies that had announced plans to raise prices, and Aetranet CEO Jim Deutsch, a former president of the American Medical Association, resigned after a backlash against his actions.
According to the New Jersey State Bar, the state bar concluded that Deutsch violated a state law that prohibits violations of state law by employees of an organization.
In addition, the Bar found that Deisch had engaged in a pattern or practice of making unlawful or misleading statements regarding his position with Aetramed.
In a statement to Business Insights, AETranet said that the board of directors had decided to “re-establish the trust of our shareholders and partners by reaffirming the Board’s belief in the need for Aetronet to maintain the integrity and independence of its operations and for its board of Directors to maintain their fiduciary duties.”
The SEC has not yet determined if the board’s decision to fire Deutsch will result in any discipline against the CEO.
A spokeswoman for the Securities and Exchanges Commission told Business Insider that it would “take appropriate actions” if the company found that it violated any rule of the Securities Exchange Act of 1934.