Securities

Recent Posts

Insider Trading and Suspicious Trading, Not the Same
Posted on 26 Aug 2010 by Thomas O. Gorman

Investigating insider trading is difficult. Proving it is even more difficult. Frequently, the trading is "suspicious" because of its timing, magnitude, or for a variety of other reasons. Market watchers such as FINRA use this term to classify... Read More

The Impact of Newman on SEC Enforcement: Part I
Posted on 29 May 2015 by Thomas O. Gorman

This is the first segment of a five part series discussing the impact of the Second Circuit’s ruling in Newman on SEC insider trading cases Introduction In seeking rehearing and an en banc hearing before the Second Circuit Court of Appeals... Read More

Jury Gives SEC Split Verdict In Insider Trading – Front Running Trial
Posted on 15 Jan 2014 by Thomas O. Gorman

The Commission was handed a split verdict in its insider trading – front running case against Siming Yang and his investment company, Prestige Trade Investments Limited by an Illinois jury yesterday. SEC v. Yang, Case No. 12-cv-02473 (N.D. Ill.... Read More

Private Investment Funds and Reporting Requirements Under the Ethics Code Rule
Posted on 23 Jun 2010 by Doug Cornelius

As I wrote about yesterday on the code of ethics for an investment adviser , one of the requirements of registering with SEC as an investment adviser is implementing a code of ethics. The most involved part of the code is the extensive reporting requirement... Read More

Insider Trading: Does Payton Begin the Erosion of the Newman Tipping Test?
Posted on 13 Apr 2015 by Thomas O. Gorman

The Second Circuit’s decision in U.S. v. Newman, 773 F. 3d 438 (2 nd Cir. 2014) [ an enhanced version of this opinion is available to lexis.com subscribers ] regarding the personal benefit test in insider trading either radically altered the law... Read More

SEC Insider Trading Cases as Administrative Proceedings – A New Trend?
Posted on 1 Oct 2014 by Thomas O. Gorman

Traditionally, the SEC has brought insider trading cases as civil injunctive actions. The recent emphasis on administrative proceedings, however, appears to be changing that. Earlier this week the agency brought an insider trading cases as an administrative... Read More

Who Caught Them? Compliance or the SEC?
Posted on 19 Jul 2011 by Doug Cornelius

The SEC announced they had obtained an emergency freeze against three Swiss-based traders under an allegation of insider trading. The SEC claims that Compania International Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management... Read More

Lawyers and Insider Trading
Posted on 21 Mar 2011 by Doug Cornelius

Even smart people do dumb things. Lawyers presumably know the law, but still break it. That means they occasionally take some short term profits through insider trading and get caught red-handed. Everyone is focused on the Galleon Group insider trading... Read More

Another Galleon Defendant Is Sentenced to Prison
Posted on 22 Aug 2011 by Thomas O. Gorman

Another defendant in the on going Galleon insider trading investigation was sentenced to prison. This time it was Jason Goldfarb who previously pleaded guilty. The court sentenced Mr. Goldfarb to three years in prison. U.S. v. Goffer, No. 1:10-cr-00056... Read More

Liquidity Problems of Company Yields Two Insider Trading Cases
Posted on 1 Apr 2010 by Thomas O. Gorman

Thomas O Gorman, Partner, Porter, Wright, Morris & Arthur The Commission filed its second settled insider trading case arising out of the financial difficulties of Blueknight Energy Partners, LP, previously known as SemGroup Energy Partners LP... Read More

Trends In SEC Enforcement Actions: Focus On Individuals, Insider Trading
Posted on 6 Jul 2012 by Thomas O. Gorman

The SEC is on pace to settle a record number of enforcement actions, according to a new report released by NERA Economic Consulting ( here ). This trend is being driven by a marked rise in the number of actions against individuals, primarily in insider... Read More

Newman: Respondent’s Opposition to Supreme Court Review
Posted on 31 Aug 2015 by Doug Esten

The battle lines are now clearly drawn over Newman and what constitutes impermissible tipping in violation of Exchange Act Section 10(b) ( here ). Previously, the Government filed a petition for certiorari arguing that Newman , which addressed the requirements... Read More

SEC ALJ Dismisses Insider Trading Claims Based on Dirks-Newman
Posted on 15 Sep 2015 by Thomas O. Gorman

When the Second Circuit handed down Newman the SEC joined with the Manhattan U.S. Attorney seeking rehearing en banc and arguing that the case would significantly hinder insider trading enforcement. Many wondered if the agency would move all it cases... Read More

SEC Charges Two Market Professionals With Insider Trading
Posted on 23 Sep 2013 by Thomas O. Gorman

The SEC brought insider trading charges against two securities professionals. One was an investment adviser who traded for his account and several of his clients. The other was a registered representative. SEC v. Tabor Klein, Civil Action No. 9:13-cv... Read More

Arnold & Porter Webcast: The Government's Current Focus on Insider Trading
Posted on 20 Apr 2011 by arnold

The ongoing Galleon trial, and all the related SEC and criminal investigations, have renewed the focus on insider trading. What is it? When do you become restricted? How do you handle an investigation if misfortune strikes and you become involved in one... Read More

  • Blog Post: UBS Insider Trading Ring

    From the SEC's press release alleging that a former director at UBS shared inside information via "coded" e-mails with college friends: "They thought it was clever to use code words such as frequent flyer miles and wedding registry gifts to conceal their insider trading scheme...
  • Blog Post: Liquidity Problems of Company Yields Two Insider Trading Cases

    Thomas O Gorman, Partner, Porter, Wright, Morris & Arthur The Commission filed its second settled insider trading case arising out of the financial difficulties of Blueknight Energy Partners, LP, previously known as SemGroup Energy Partners LP. SEC v. Navarro , Civil Action No. 4:10-CV-189 (N...
  • Blog Post: Galleon Management Pleadings and Briefs

    On October 16, 2009, the Securities and Exchange Commission (SEC) instituted a civil injunctive action in the United States District Court for the Southern District of New York charging Raj Rajaratnam and his hedge fund advisory firm Galleon Management LP with perpetrating a massive insider trading...
  • Blog Post: This Week in Securities Litigation (May 21, 2010)

    SEC Chairman Schapiro and others appeared before congress this week to testify about the recent market disruption. At the same time the SEC, while joining yet another financial fraud task force, took the unprecedented step of designating the deputy director of the division of enforcement as lead...
  • Blog Post: The First Galleon Defendant is Sentenced

    Mark Kurland became the first defendant to be sentenced in the Galleon insider trading cases, discussed here . He had previously pleaded guilty to conspiracy and securities fraud. The court sentenced Mr. Kurland to serve twenty seven months in prison followed by two years of probation. He will also...
  • Blog Post: Sting Operation Catches Two Insider Trading

    Last year so-called blue collar tactics - wire taps and informants - resulted in the Galleon insider trading cases, discussed here . In January, an undercover sting operation yielded 22 arrests for FCPA violations, discussed here . Yesterday, another undercover sting operation resulted in criminal...
  • Blog Post: Idiot Inside Traders

    This week the FBI arrested the administrative assistant to a high-level Disney executive and her boyfriend. Turns out they were not the smartest couple of inside traders out there. The SEC's complaint speaks for itself: The Plan 9. Beginning in early March 2010, various hedge funds, including...
  • Blog Post: Lessons from the Pequot Investigation

    Things are not always as they seem. This sage maxim has been cited many times in different contexts. The resolution of Pequot insider trading investigation last week, along with the earlier scandal the initial inquiry generated, is a good illustration of how this principle applies in SEC investigations...
  • Blog Post: Private Investment Funds and Reporting Requirements Under the Ethics Code Rule

    As I wrote about yesterday on the code of ethics for an investment adviser , one of the requirements of registering with SEC as an investment adviser is implementing a code of ethics. The most involved part of the code is the extensive reporting requirement on securities activities to the chief compliance...
  • Blog Post: Suspicion, Snippets and Proof: The Rorech Insider Trading Case

    Insider trading cases are very difficult to prove. Nobody doubts this basic fact. Equally clear is the fact that there is a significant difference between "suspicious" trading and insider trading. The former may occur because of the timing of a trade if, for example, it is executed shortly...
  • Blog Post: Now That's Insider Trading!

    You know, I can't understand why people risk so much (career, reputation, family) for so little. How many times have you heard about the lawyer who gave in to the temptation to trade on client confidence only to reap $5,000 profit and an indictment. Now, comes word of two guys who know what they...
  • Blog Post: SEC Finally Catches Up With Former Deloitte Vice Chairman

    Back in November, 2008, Deloitte sued its former vice chairman for trading in securities of the firm's audit clients. The SEC has filed its case against Thomas Flanagan and included his son, Patrick Flanagan. The SEC alleged Flanagan traded in the securities of multiple Deloitte clients on...
  • Blog Post: Insider Trading and Suspicious Trading, Not the Same

    Investigating insider trading is difficult. Proving it is even more difficult. Frequently, the trading is "suspicious" because of its timing, magnitude, or for a variety of other reasons. Market watchers such as FINRA use this term to classify trading that merits additional investigation...
  • Blog Post: Advice for Young Lawyers

    Yesterday, the SEC settled insider trading charges against James Self and Stephen Goldfield . Self was director of Business Development at Merck and Goldfield, Self's classmate at the Wharton School (UPenn), was a hedge fund manager. According to the complaint , Self disclosed confidential inside...
  • Blog Post: Lessons Worth Learning

    By now it should be obvious to most readers that one of my target audiences when I write this blog is mostly recent law grads still getting their footing as young associates. I think it's useful to reinforce a couple of lessons that they may not have thought much about while in law school, but...
  • Blog Post: SEC v. Cuban: A High Profile Victory for the SEC– For Now

    The SEC won a significant victory in the Fifth Circuit Court of Appeals . The court reversed the Commission's high profile loss ( here ) in its insider trading case against entrepreneur and Dallas Mavericks owner Mark Cuban. SEC v. Cuban , No. 09-10996 (5th Cir. Sept. 21, 2010). The real question...
  • Blog Post: Making a Bad Day Worse

    Former SEC Enforcement Director Steve Cutler once told a meeting of the DC Bar Association that "no matter how bad the underlying conduct, you can always make things worse." At the time Mr. Cutler was talking about failing to produce documents in a Commission investigation. His remarks ...
  • Blog Post: Don’t Lie to the Feds When Caught for Insider Trading

    The "classical theory" of insider trading targets "a corporate insider's breach of duty to shareholders with whom the insider transacts[, and the] misappropriation theory outlaws trading on the basis of nonpublic information by a corporate 'outsider' in breach of a duty...
  • Blog Post: Coffee and Compliance

    I just sat down with a fresh cup of coffee from Green Mountain Coffee Keurig brewer. The smell of coffee mixed with stench of compliance failures coming from Green Mountain Coffee Roasters, Inc. You know there is trouble when Sam Antar, the convicted felon and criminal CFO of Crazy Eddie, has you...
  • Blog Post: On Ear Trumpets and Insider Trading

    The internet has been alight the past few days with talk of time travel due, as the Huffington Post so astutely notes , not to the 25 th Anniversary of Back to the Future , but to supposed video of a woman speaking on a cell phone in the background of a 1928 Charlie Chaplin film The Circus . ...
  • Blog Post: Insider Trading – Still a Key Focus of Regulators

    Financial reform and the implementing Dodd-Frank continue to be key topics for market regulators. The SEC, CFTC and others are busy writing rules to implement the Act. Many on Capital Hill are studying ways to limits or repeal portions of the landmark legislation, particularly in view of the recent...
  • Blog Post: The Insider Trading Probes: More Blue Collar Tactics

    Insider trading involving hedge funds and their expert advisers is the focus of a probe by the U.S. Attorneys Office for the Southern District of New York, the FBI and the SEC, according to multiple media sources. Spokesmen for the USAO and the SEC have declined comment. Nevertheless, information...
  • Blog Post: Insider Trading: Enforcers and the Harm Their Tactics Cause

    Insider trading investigations increasingly rely on blue collar tactics such as FBI raids and the resulting publicity, as well as wired cooperating witnesses and similar techniques. The high profile raids by dozens of FBI agents on three hedge funds last week are becoming emblematic of the tactics...
  • Blog Post: The Insider Trading Probes, A Government Admission

    The government's highly publicized insider trading investigations took another turn on Monday. Those inquiries, as discussed here , appear to focus on traders, mutual funds, hedge funds and others who use expert networks. They at least suggest that the government may be looking to expand the definition...
  • Blog Post: Bad Accountants

    With all the interest in the ongoing Galleon/SAC/expert networks insider trading investigation, this run of the mill scam almost slipped past. Thankfully this one doesn't involve lawyers - just bad accountants and traders. The SEC charged a former Deloitte Tax LLP partner and his wife with repeatedly...