Second Circuit Court of Appeals Issues Significant Insider Trading Ruling in US v. Newman

December 10, 2014

Earlier today, the Second Circuit Court of Appeals issued its most significant ruling in an insider trading case in more than a decade. The Second Circuit vacated the criminal convictions of two hedge fund managers who were “downstream” or “remote” “tippees” several steps removed from the original source or “tipper” of the inside information.

The opinion is significant for two reasons. First, it is likely to limit significantly the government’s ability to bring cases against downstream tippees in the future, and will likely result in the reversal of various convictions currently pending on appeal. Second, while many commentators had expected the Second Circuit to impose this knowledge of the benefit requirement – and thereby to limit remote tippee cases – the opinion also contains a separate holding that will affect almost all insider trading cases.

Read "Second Circuit Court of Appeals Issues Significant Insider Trading Ruling in U.S. v. Newman."