Insider trading may be redefined if Supreme Court hears case

The Supreme Court is being asked to review a case that could lead to major changes in how insider trading is prosecuted.

Government says prosecutions could become more difficult if ruling stands

The U.S. Solicitor General has petitioned the Supreme Court to take on a case that could ultimately lead to big changes in how insider trading cases are prosecuted, according to the Wall Street Journal. The court is being asked to review a decision by a United States Appeals Court that concluded prosecutors had not proven that the individuals giving out confidential information in an insider trading case had received a tangible benefit as a result of their actions. If the court decides to hear the case, its final decision could have a big impact on white collar criminal law and may make it much more difficult for the government to successfully prosecute those accused of insider trading.

Benefits to tippers

For an insider trading case to be prosecuted successfully, the government must prove that the tipper (the one giving out the confidential information) benefited or expected to benefit from leaking the information. In most cases, those benefits are tangible in nature, like money or other assets. However, the benefit can also be more abstract, such as when the information is given on the basis of a familial connection or social relationship.

In the case in question, however, the United States Appeals Court for the Second Circuit ruled that the government had not proven a benefit to the tipper because there was "no proof of a meaningfully close personal relationship" between the tipper and the one who received the information that would result in the tipper expecting to receive a benefit as the result of his actions. In other words, the Appeals Court ruled that a higher standard of evidence is necessary in order to prove a benefit to the tipper in cases that involve only a casual friendship between the tipper and the recipient of the confidential information.

Insider trading redefined?

The government argues that that decision increases the standard of evidence that has already been ruled acceptable in insider trading cases by the Supreme Court itself. Allowing the decision to stand, the government contends, would make successfully prosecuting insider trading overly difficult and would essentially constitute a redefinition of insider trading itself.

Even if the court agrees to hear the case-a decision that is not expected until at least this fall-it could rule against the government and uphold Appeals Court's ruling. As the New York Times points out, the Supreme Court has been reticent in recent years about interpreting the law in such a way that could result in overcriminalization due to what may be considered only "marginally illegal" activities. Alternatively, the court may refuse to review the decision outright or at least wait until whatever ramifications of that decision are have made themselves clear in future cases.

White collar crime

Prosecutors are cracking down on white collar crime like never before and those who are convicted risk facing lengthy prison sentences. Anybody who has been charged with a white collar crime should get in touch with a criminal defense attorney immediately. With a vigilant and experienced defense team on one's side, a defendant will have a much better chance of possibly avoiding the serious consequences that can result from a conviction.