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In the Courts

By ALM Staff | Law Journal Newsletters |
January 31, 2015

Second Circuit: 'Tipping' Liability for Insider Trading Requires Knowledge of Tipper's Benefit

On Dec. 10, 2014, the Second Circuit Court of Appeals vacated an insider-trading conviction because the government failed to prove that the defendants knew the ultimate source of their inside information had benefited from sharing the information. United States v. Newman, et al., 2014 U.S. App. LEXIS 23190 (2d Cir. Dec. 10, 2014). In an opinion highly critical of recent insider-trading prosecutions, the Second Circuit emphasized past Supreme Court doctrine illustrating that “not every instance of financial unfairness constitutes fraudulent activity under [insider-trading laws].” Newman at *20 (quoting Chiarella v. United States, 445 U.S. 222, 232 (1980)).

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