This column will focus on two new and unrelated developments linked only by the fact that they both emanate from California: (1) the Ninth Circuit has handed down a significant decision on insider trading—United States v. Salman1—that disagrees (at least marginally) with the Second Circuit’s important (but controversial) decision in United States v. Newman2; and (2) the SEC’s Regional Office in California has issued Wells Notices to attorneys, taking the position that an attorney representing clients in immigration matters may be acting as a broker under the federal securities laws. The upshot is to place the SEC in what should be the uncomfortable position of using a sledgehammer to swat flies.
Rakoff’s Revenge? Much attention has focused on the decision in United States v. Salman because it was written by an obscure Southern District judge, named Jed S. Rakoff, who was sitting by designation with the Ninth Circuit. Because Rakoff has not always encountered a sympathetic reception on appeal in the Second Circuit (and because the press regards him as the rock star of the federal bench), the case has received possibly more attention than it deserves.3 Some press reports view the case as one in which Rakoff curbed the overreach of the decision in Newman and thus evened his personal score with the Second Circuit. Frankly, that is a little silly. In my humble judgment, most (but possibly not all) Second Circuit panels would have reached the same outcome as did the Ninth Circuit in Salman, if the case had come up on appeal from a conviction in the Southern District. Conversely, most (but probably not all) Ninth Circuit panels would have reached the same outcome as the Second Circuit did in Newman (although they hopefully would not have overwritten their decision quite as much or attempted to lay down a detailed code of insider trading law covering all future cases).
