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Supreme Court Won't Review Insider-Trading Ruling

DOW JONES & COMPANY, INC. 10:07 AM ET 10/05/15

The Supreme Court declined to review a closely-watched federal appeals court decision that prosecutors say will make it harder for them to win insider trading cases.

Reports WSJ's Brent Kendall:

The justices, without comment, said they would not consider the department's challenge to a major appeals-court decision from last year overturning two insider-trading convictions of hedge-fund portfolio managers.

That ruling, from the Second U.S. Circuit Court of Appeals in New York, said it wasn't enough for prosecutors to show that someone who received an inside tip traded on material non-public information about a corporation.

Instead, prosecutors also had to prove that the tip recipient knew the confidential information came from an insider, and that the insider disclosed the information for a personal benefit, the appeals court said.

In a July petition filed with the Supreme Court, U.S. Solicitor General Donald Verrilli said December's Second Circuit ruling clashed with long-standing precedent and had troubling implications for the government's ability to police Wall Street.

"The effect of the new rule will be to hurt market participants, disadvantage scrupulous market analysts, and impair the government's ability to protect the fairness and integrity of the securities markets. Those harmful consequences warrant this court's review," Mr. Verrilli's petition said.

The Second Circuit case overturned the 2012 convictions of former hedge-fund traders Todd Newman and Anthony Chiasson. The two were accused of using confidential information to make $72 million trading on stock in technology companies Dell Inc. and Nvidia Corp. The pair received tips that went through a network of investor-relations representatives and analysts before reaching analysts who worked for the two men, according to legal filings.

Lawyers for the two traders had urged the Supreme Court to stay out of the case and leave the lower court ruling in place. They said the decision was correct and would not have the disruptive effects the government claimed. Here's more background on the matter from WSJ's Christopher M. Matthews.


(END) Dow Jones Newswires
10-05-151007ET
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