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Compliance In Focus
Posted by Brad Liebermann on Tue, Oct 27, 2015

Financial Disclosure of Equity Interest

Financial_Disclosure_of_Equity_Interest

The FDA evaluates the disclosure of financial information from clinical investigators to determine the reliability of data submitted to the FDA and identify steps to minimize the potential for bias. The value of an investigator’s financial interest in the sponsor may have the potential to increase if the product is approved. 21 CFR 54 states that investigators must disclose significant equity interest in the sponsor, any proprietary interest in the sponsor and significant payments of other sorts from the sponsor during the time the investigator is carrying out the study and for a period of one year following completion of the study.

21 CFR 54.2(b) defines significant equity interest as “any ownership interest, stock options, or other financial interest whose value cannot be readily determined through reference to public prices (generally, interests in a nonpublicly traded corporation), or any equity interest in a publicly traded corporation that exceeds $50,000”.   

Although the regulation states a specific value of $50,000 equity interest in a publicly traded corporation, it also raises some questions. In February 2013, the FDA released a Guidance for Clinical Investigators, Industry, and FDA Staff regarding financial disclosure by clinical investigators. This guidance is intended to assist in interpreting and complying with the regulations governing financial disclosure by clinical investigators, 21 CFR part 54. The guidance answers the following questions regarding equity interest:

  1. If an investigator’s interest exceeds the $50,000 threshold, then specific details including the size and nature should be disclosed. Details should include the current valuation and type(s) (stock, options, etc.).  For example, $55,000 in stock and $30,000 in stock options.
  2. What if an investigator has $40,000 of stock at the time of the disclosure, but the price of this stock increases to $50,000? The guidance indicates that the FDA recognizes that the value of interest has the potential to fluctuate during the course of the study. Therefore, investigators should report when they become aware that the interest has exceeded $50,000.
  3. In the majority of cases, equity interests held in publicly traded mutual funds are not reportable. However, it becomes reportable if the investigator has control over the buying or selling of stocks within the fund.
  4. In the majority of cases, equity interests held within a 401 (k) or other retirement account is not reportable. However, it becomes reportable if the investigator has control over the buying or selling of the sponsor’s individual stock within the account.

Additional information regarding the disclosure of equity interest can be found on the FDA website and in the Guidance for Clinical Investigators, Industry, and FDA Staff regarding Financial Disclosure by Clinical Investigators

Does this FDA guidance answer your questions regarding the disclosure of equity interest in a publicly traded corporation? What other questions about investigator disclosures do you have?

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Topics: Draft Guidance, Financial Disclosure, FDA

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