United States v. Newman – Uncovering Its Impact and Implication to Insider Trading
Over the years, the Securities and Exchange Commission (SEC) together with the Department of Justice (DOJ) has extensively amplified their scrutiny of alleged insider trading.
In the Second Circuit’s recent decision in United States v. Newman, the government’s ability to prosecute market-threatening forms of insider trading has been limited. The government will no longer be able to face the burdens in criminal or civil cases under the classical insider trading theory, unless it demonstrates a substantial quid pro quo – that in a firm and significant way, the tipper benefitted from the tip and that the tippee was aware of the personal benefit to the tipper.
This decision makes it a lot harder for prosecutors to establish remote tippee liability. However, it does not change the liability for corporate insiders trading on nonpublic material information or disclose information for personal benefits. Moreover, the decision is only a binding precedent in the Second Circuit.
Such court decision is considered to represent one of the most remarkable developments in the insider trading law. Yet, it is feared that the decision may let executives engage in insider trading and divulge material, nonpublic information and then escape liability by scheming circumstances that will appear lacking of a tangible personal benefit to the executives.
In a two-hour LIVE Webcast, a seasoned panel of thought leaders and professionals are assembled by The Knowledge Group to provide the audience with an in-depth discussion of the fundamentals as well as updates in the United States v. Newman insider trading case. The panel will also offer the audience with their notable insights on this significant topic.
Key topics include:
- Insider Trading Law - An Overview
- Second Circuit’s Decision in United States v. Newman
- Personal Benefit Requirement
- Liability of Downstream Recipients of Insider Information
- Legal Challenges in Insider Trading
- Potential Liability of Remote Tippees
- Up-to-the-minute Regulatory Developments
Douglas R. Hirsch, Partner
Sadis & Goldberg LLP
Samuel J. Lieberman, Partner
Sadis & Goldberg LLP
- U.S. v. Newman, 773 F.3d 438 (2d Cir. 2014)
- Enhances Personal Benefit Requirement: “Objective,” “Consequential” and Be Exchange of “Pecuniary or Similarly Valuable” Nature
- Mere friendship, mentoring, positive feedback, networking not enough
- SEC Loses on Personal Benefit in Its Own Court, U.S. Attorney has plea bargains vacated (e.g., Ruggieri, Conradt)
- Gov’t Still Wins: U.S. v. Salman, 792 F.3d 1087 (9th Cir. 2015): Rejects Newman “Pecuniary or Similarly Valuable” Test, for tip by brother-in-law
- SEC v. Payton, 2015 WL 1538454 (S.D.N.Y. Apr. 6, 2015) (applies lower standard in civil case: sharing apt. expenses and referring attorney sufficient)
- Supreme Court Denies Gov’t Petition for Appeal of Newman
Vinita Juneja, Senior Vice President
NERA Economic Consulting
- What are the relevant financial economic analysis in insider trading cases?
- Who knew what when?
- Was what the insider knew material?
- How do the relevant trades fit Into the investor’s pattern of trades?
- What else do we know about the investor’s trading?
- Loss Avoidance
- What Is the loss avoided or the monetary gain by the insider?
- How does Newman affect the relevant economic analyses?
- Determination of Personal Benefits – is there a monetary gain or other benefit to tipper?
- Even more importance of correct materiality assessment from the tippee and tipper perspectives
Who Should Attend:
- Attorneys General
- Top Level Management
- In-house Counsel
- Legal Advisers
- Private and Public Companies
- Multinational Companies
- Other related/interested Professionals and Organizations
Dr. Juneja is a Senior Vice President at NERA and the Co-Chair of NERA's Global White Collar Practice. She has worked on numerous white collar criminal matters, regulatory enforcement investigations and related litigation, including several high profile insider trading matters – both for the government and for defendants. Dr. Juneja was formerly the Global Chair of NERA’s Securities and Finance Practice and has a PhD and a Master’s degree, both in economics, from Harvard University. Dr. Juneja has testified and submitted affidavit and expert report testimony in US federal district and state court proceedings, in Canadian court, in Israeli district court, and in arbitrations in the United States, Canada, and the United Kingdom. Her arbitration and mediation experience includes appearances before the American Arbitration Association, the NASD, the NYSE, the ICC International Court of Arbitration, the London Court of International Arbitration, and the Judicial Arbitration and Mediation Services.
Dr. Juneja is a Senior Vice President at NERA and the Co-Chair of NERA's Global White Collar Practice. She has …
Douglas R. Hirsch is a founding member of the firm and heads the firm’s Litigation Group. Mr. Hirsch focuses his practice on financial services litigation, including SEC and FINRA enforcement actions, securities class and derivative litigation, and disputes between investors and investment advisers. Mr. Hirsch also regularly counsels and advises investment advisers in connection with the drafting and litigation of employment and partnership/operating agreements, service provider agreements, third party marketing agreements, disclosure issues and ISDA issues.
Mr. Hirsch started his career at Lord Day & Lord, Barrett Smith and then worked at Schulte Roth & Zabel before becoming one of the founding members of Sadis & Goldberg. During the course of his career, Mr. Hirsch has successfully obtained numerous trial verdicts and arbitration awards on behalf of his clients and has successfully argued numerous appeals in both federal and state court. Mr. Hirsch is a frequent speaker at industry conferences.
Mr. Hirsch received his J.D. in 1990 from Hofstra University School of Law, where he was a member of the law review. He received his B.A. degree in 1987 from Union College. He is a member of the New York and New Jersey Bars, the United States Court of Appeals for the First, Second and D.C. Circuits and the United States District Courts for the Southern and Eastern Districts of New York and the District of New Jersey.
Douglas R. Hirsch is a founding member of the firm and heads the firm’s Litigation Group. Mr. Hirsch focuses his practice …
Sam Lieberman is a partner in Sadis & Goldberg LLP’s Securities Litigation Group. He regularly handles high-profile securities litigation, enforcement actions, and government investigations on behalf of companies and individuals. He has handled investigations covering a wide-range of securities law issues before the SEC, FINRA, CFTC, CFE/CBOE, and CME. He has also handled precedent-setting cases addressing corporate governance, including in Delaware Chancery Court. His recent cases have been profiled in the Wall Street Journal, the New York Times, the New York Post, Bloomberg, Reuters, and Law360.
Sam Lieberman is a partner in Sadis & Goldberg LLP’s Securities Litigation Group. He regularly handles high-profile securities litigation, enforcement …
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About NERA Economic Consulting
NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA’s economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.
NERA’s clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world’s largest economic consultancies. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.
About Sadis & Goldberg LLP
Sadis & Goldberg LLP is a leading New York based law firm focused on delivering sophisticated and creative legal solutions in a highly professional manner. The Firm is internationally recognized for its financial services practice that consists of representing several hundred investment advisers and related investment entities (including hedge funds, private equity funds and venture capital funds). Similarly, the Firm provides regulatory and compliance advice and representation in connection with SEC enforcement proceedings. Notwithstanding the emphasis on the financial services industry, the Firm also provides a full range of tax, litigation, real estate, intellectual property and corporate services to its clients. For more information, visit: www.sglawyers.com