What’s At Stake for Insider Trading Prosecutions After U.S. v. Newman

March 19, 2015

Westlaw Journals (Thomson Reuters)
By Phyllis Lipka Skupien, Esq

The 2nd U.S. Circuit Court of Appeals’ landmark decision in United States v. Newman has sent shock waves through the securities bar, as the ruling has revitalized the defense for many insider trading cases and raised the standards for prosecutors seeking convictions for securities fraud.

United States v. Newman et al., No. 13-1837, amicus briefs filed (2d Cir. Feb. 26, 2015).

On Dec. 10 the appeals court overturned the convictions and prison terms of hedge fund portfolio managers Todd Newman and Anthony Chiasson after finding that the government had failed to prove they knew corporate insiders had disclosed confidential information for a “personal benefit.” United States v. Newman, 773 F.3d 438 (2d Cir. 2014).

“This is a significant holding, as it precludes prosecution in cases where an insider provides information to a friend or relative with no present benefit or prospect of future reward,” said Lathrop Nelson, partner at Montgomery McCracken Walker & Rhoads in Philadelphia, who was not involved in the case.

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