Limits on Insider-Trading Prosecutions to Remain
October 05 2015 - 3:00PM
Dow Jones News
WASHINGTON—The Supreme Court on Monday turned away a closely
watched Justice Department appeal seeking more leeway to bring
insider-trading prosecutions, a move that ends the government's
effort to overturn a court ruling favoring Wall Street
defendants.
The justices, without comment, said they wouldn't 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 nonpublic
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.
The decision took some steam out of a Justice Department
crackdown on insider trading.
U.S. Solicitor General Donald Verrilli, in a petition asking the
Supreme Court to hear the case, had argued the Second Circuit's
legal rule would "hurt market participants, disadvantage scrupulous
market analysts and impair the government's ability to protect the
fairness and integrity of the securities markets."
The appeals court ruling tossed out the convictions of former
hedge-fund traders Todd Newman and Anthony Chiasson for relying
upon confidential information to make $72 million trading on shares
of Dell Inc. and Nvidia Corp.
The appeals court said the men were several levels removed from
the original sources of the confidential information and that
prosecutors didn't prove beyond a reasonable doubt the defendants
knew they were trading on inside tips. The court also said there
was thin evidence that the original inside tippers at Dell and
Nvidia received any personal benefit from disclosing the
information.
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 wouldn't have the disruptive
effects the government claimed.
Write to Brent Kendall at brent.kendall@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 05, 2015 14:45 ET (18:45 GMT)
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