The U.S. Court of Appeals for the Second Circuit recently issued a ground-breaking decision in United States v. Newman, finding that to be guilty of insider trading, a tippee of material non-public information (MNPI) must know that the insider who conveyed the information (on which trades were made) did so in exchange for a personal benefit.1 In its decision, the court also narrowed the definition of what constitutes a “personal benefit,” and by doing so, found that the government’s evidence of insider trading was insufficient and dismissed the indictment with prejudice.
Because of the circuit’s clear decision, the Department of Justice and other regulators face a significant hurdle in bringing future insider trading charges against “remote” tippees, as prosecutors must prove that those tippees—who often do not know the insiders—knew that insiders conveyed the MNPI in exchange for some benefit. Newman also makes even immediate tippee cases more difficult to prosecute given the now-limited definition of “personal benefit” of which the tippee must have knowledge.
Applicable Law
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
