International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, January 8, 2015

What Is the Impact of the Overturned Convictions of United States v. Newman on Insider Trading Prosecutions, such as SAC's?

United States v. Newman (2d Cir. Dec. 10, 2014).

Baker Hostetler analyzes the case > here <.  "This decision has significant implications for criminal insider trading prosecutions and those brought civilly by the United States Securities and Exchange Commission (SEC). Fundamentally, it will make it more difficult for the government to charge alleged remote tippees (like the defendants in this case who were three or four persons removed from the corporate insiders) with violations of the federal securities laws. ..."

Willkie Farr anayzes the case > here <. "Characterizing the overreach of the Government’s un precedented effort to jail investment rofessionals who traded following receipt of third- and fourth-hand information without knowing either the information’s source or the existence of any improper motive to the disclosure as a “doctrinal novelty,” the Court attempted to provide the guidance it noted was sorely needed. ..."

SECThe overturned convictions may have a detrimental impact to the government's case against SAC Capital's Michael Steinberg's conviction.  An SAC Capital Portfolio Manager Michael Steinberg was convicted and sentenced in May 2014 to 42 Months in Prison for insider trading because he earned $1.8 Million from such information.  Also see SEC decision of October 2014 barring Steinberg from the financial industry.  Bloomberg reports - "SAC Capital Advisors LP hedge fund manager Michael Steinberg’s appeal of his insider trading conviction was further delayed by a court as the government decides how to respond to a ruling that upended guilty verdicts in two related cases."

 See previous analysis post of December 19.

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