Thursday, September 6, 2012
The Second Circuit revived an insider trading case brought by the SEC against Nelson Obus, a New York hedge fund manager. The SEC charged that Obus received a stock tip from Thomas Strickland, a former employee at GE, that Sunsource was about to be acquired by Allied Capital. GE was looking into financing the acquisition. The federal district court had dismissed the case in late 2010, ruling that neither Strickland nor GE was a corporate insider of SunSource and that the SEC had not "demonstrated the requisite degree of deceptive conduct on the part of any defendant."
The Appeals Court, however, disagreed and stated that the SEC "has established genuine questions of fact about whether Obus knew that Strickland had breached a duty to GE Capital and whether Obus traded in SunSource stock while in knowing possession of material non-public information...."