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Earlier this month, the US Supreme Court said it would not hear a case in which the appeals court overturned two insider trading convictions. By refusing to hear the case, they effectively let stand the decision below, which many say will make it much tougher to prosecute insider trading cases. As is the norm, the Supremes don’t say why they choose not to grant “certiorari” and hear a case.
The appeals court threw out the convictions of two hedge fund managers because the original tipping of inside information by company insiders was not proven to have been swapped for a personal benefit. The court created a very narrow definition of this benefit, and also required that the ultimate traders knew the information was originally tipped in violation of this standard, and found in this case that also was not proven.
Not only does this get the two guys in question off, many others who have been convicted are now saying theirs should also be reversed if this is the new standard. This is also a blow for the US Attorney’s Office in NY which did a big push on insider trading in the hedge fund industry in recent years. But the law on insider trading has been murky for many years. Frankly I’ve scratched my head at times both as to some who were, and others that were not, convicted. Maybe it’s time for Congress to look at setting clear standards to govern future conduct?
Read additional articles at the David Feldman Blog.
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