Alerts
Newman’s Aftermath: District Court Vacates Four Insider Trading Guilty Pleas; Government Seeks Rehearing in Second Circuit
January 27, 2015
Last week saw two significant developments for insider trading law stemming from the Second Circuit’s important decision in U.S. v. Newman, 773 F.3d 438 (2d Cir. 2014). First, the government was dealt a significant loss when, on Jan. 22, 2015, U.S. District Judge Andrew L. Carter, Jr. vacated four insider trading defendants’ guilty pleas in the wake of Newman and rejected the government’s argument that the Newman decision does not apply to cases prosecuted under the so-called “misappropriation” theory of insider trading liability. Second, the next day, the government filed a petition for panel rehearing and rehearing en banc in Newman, seeking reversal of the Second Circuit’s earlier decision vacating the convictions of defendants Todd Newman and Anthony Chiasson and dismissing their indictments with prejudice. Earlier this week, the SEC indicated its support of the U.S. Attorney’s Office’s position by filing a motion seeking to submit an amicus curiae (friend of the court) brief in support of the petition for rehearing in Newman.
These developments make clear that Newman is, as the government states in its petition for rehearing, “one of the most significant developments in insider trading law in a generation” (Petition, at 22-23) and suggest that the full impact of Newman on insider trading law still remains to be seen. These and further developments involving Newman should be closely followed by financial professionals and compliance personnel. Newman and its progeny will be important not just in criminal insider trading cases but in civil cases brought by the SEC as well as in investigations conducted by securities regulators.