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Insider Trading Is Not Dead

Turns out, the long rumored death of Insider Trading law was greatly exaggerated. In the first insider trading trial since the Second Circuit redefined insider trading law in the Newman case, Manhattan U.S. Attorney Preet Bharara secured the conviction of Sean Stewart. Stewart had been accused of tipping of giving his own father inside information about five mergers so that his dad could make lucrative trades.

In the Newman case, the Second Circuit ruled that to be guilty of insider trading, the initial "tipper" must have leaked confidential information in exchange for some "personal benefit" and the downstream trader must have been aware that the tipper exchanged confidential information in exchange for the personal benefit.

The Newman case began when Summers & Schneider convinced the government that it would not be able to secure a conviction of its client, Chris Choi, because he had not received any benefit in exchange for confidential information. In its decision, the Second Circuit actually compared two of Summers & Schneider's clients, Choi, and Sonny Nguyen, who had received a nominal benefit in exchange for confidential information. Summers & Schneider had previously negotiated a favorable sentence of probation for Mr. Nguyen. 

The jury in the Stewart case were deadlocked for several days. Based upon interviews with jurors after the verdict, it appears that the sticking point was whether Stewart received anything of value when he provided his father with stock tips. Ultimately, even using the higher standard dictated by the Second Circuit, the jury concluded that Mr. Stewart had indeed received a benefit and found him guilty of all charges. Expect Mr. Stewart to appeal his conviction.  

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Summers & Schneider, P.C.

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Kimberly Summers was awarded Top Women Attorneys, Avvo Client’s Choice 2012, Super Lawyers Rising Stars 2013-15, and NACDA Top 10 2015. Douglas Schneider was awarded Super Lawyers Rising Stars 2013 - 2015.