In two recent criminal trials in the U.S. District Court for the Southern District of New York, defendants have raised the so-called “mosaic theory” defense to charges of securities fraud. Both defendants were ultimately convicted. Both trials offer lessons about the contours of the defense. Is the mosaic theory a viable defense after the Rajaratnam and Whitman trials?
Origins of the Mosaic Theory
In general, in order to rise to the level of insider trading, a trade must be based upon confidential, nonpublic information that is “material.” A statement or omission is deemed material when there is “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” (See TSC Indus. v. Northway, 426 U.S. 438 (1976); Materiality is a mixed question of law and fact and is usually determined by the jury.)
This content has been archived.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]
