(FROM THE WALL STREET JOURNAL 1/8/15) 
   By Jean Eaglesham 

After Gregory Bolan quit as a research analyst for Wells Fargo & Co. in Nashville, Tenn., his former colleague, trader Joseph Ruggieri, gave him a set of keys to Mr. Ruggieri's Manhattan apartment to help him as he interviewed for jobs in New York.

This seemingly innocuous favor was cited by the Securities and Exchange Commission, when it filed civil charges last year against both men alleging insider trading.

The agency said the gesture of friendship helped demonstrate that Mr. Bolan benefited from allegedly tipping Mr. Ruggieri about his upcoming market-moving reports on several stocks from April 2010 through March 2011, when they still worked together.

Now, the supposed benefit is at the center of a courtroom battle -- the latest in a string of legal challenges stemming from a landmark appeals-court ruling in December that raises the bar for prosecutors and the SEC in proving insider trading.

The two men intend to file a motion Thursday, seeking the dismissal of all charges against them as a result of the appeals-court ruling, according to Mr. Bolan's lawyer, Sam Lieberman. The men deny wrongdoing and say the SEC's case doesn't meet the new standard set by courts.

There is no law defining insider trading. Instead, the boundary between permissible and illegal conduct has been defined -- and redefined -- over recent decades by judges. The latest decision shifts the legal landscape in favor of defendants.

In the December ruling, which overturned two insider-trading criminal convictions, the influential Second U.S. Circuit Court of Appeals said prosecutors had to prove the recipient of the tip knew the tipper got a personal benefit from passing on inside information. What's more, the ruling said the benefit couldn't be the "mere fact of a friendship" between the tipper and the trader: There had to be at least a potential reward of a financial or similarly valuable nature.

A spokeswoman for Wells Fargo, which wasn't charged by the SEC, declined to comment. A spokesman for the SEC, which in a letter last month told the administrative-law judge overseeing the case that a motion to dismiss the charges is "doomed to fail," declined to comment.

Legal experts say the case illustrates the widespread repercussions of the appeals-court ruling.

"We're going to see a lot of [challenges] going forward," said Adam Pritchard, a law professor at the University of Michigan. The issues raised by the appeals judges likely will "percolate" through criminal and SEC cases, as defense lawyers try to exploit the ruling to aid their clients, he added.

In the Wells Fargo case, the SEC alleged that Mr. Ruggieri traded ahead of six reports tipped to him by Mr. Bolan, generating a total profit of more than $117,000 in his Wells Fargo trading account. The SEC said that although Mr. Bolan didn't trade himself on his alleged tips, he gained "by virtue of his friendships" with Mr. Ruggieri and another friend, who hasn't been named, that he tipped off. The agency alleged that Mr. Bolan also benefited from being helped to win promotion at Wells Fargo in March 2011 by "positive feedback" from Mr. Ruggieri and the trader's managers.

"This is every Wall Street analyst's nightmare, because if you can bring charges based on such intangible supposed benefits, then you can bring a case like this against any analyst," Mr. Lieberman said.

Messrs. Bolan and Ruggieri both covered the health-care industry at Wells Fargo and became friends through chatting regularly as part of their jobs, Mr. Lieberman said.

The issue of friendship comes up in several of the other legal challenges now under way, with at least two of the cases involving defendants who were golfing buddies. Other evidence of friendship cited by the government includes help given with a house purchase and employing a friend's child for decorating services.

Prosecutors and the SEC "in a lot of ways . . . have been quite cavalier" about assuming that friendships are sufficient to satisfy the personal-benefit test in insider-trading cases, said Stephen Bainbridge, a law professor at the University of California, Los Angeles.

SEC Chairman Mary Jo White has said the appeal court's "overly narrow" view of insider-trading law "is a concern."

A spokeswoman for Manhattan U.S. Attorney Preet Bharara, who has until Jan. 23 to decide whether to seek a rehearing or review of the appeals-court decision, declined to comment. Mr. Bharara has said the ruling interprets the law "in a way that will limit the ability to prosecute people who trade on leaked inside information."

Jason Patil, the SEC administrative-law judge overseeing the Wells Fargo case, last month gave permission to the two men to file a motion to dismiss all the charges against them, an unusual step for a case that has already been running a few months.

The SEC, in the letter to the judge last month, said its allegations relating to Messrs. Bolan and Ruggieri meet the personal-benefits standard set by the appeals court, even assuming the ruling applies to the case. The SEC said it would present evidence when the case is heard showing the analyst tipped the trader as part of a relationship in which "each scratched the other's back to bolster the other's career and earnings."

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