SEC Chief ‘Concerned’ About Insider-Trading Ruling

Dec 11 2014 | 1:43pm ET

The victory of two convicted insider-traders on appeal yesterday is forcing the Securities and Exchange Commission to take a hard look at its own enforcement efforts.

SEC Chairman Mary Jo White said that the regulator is reviewing the U.S. Second Circuit Court of Appeals ruling, which voided the 2012 convictions of Level Global Investors co-founder Anthony Chiasson and former Diamondback Capital Management trader Todd Newman. But she hastened to add that her “initial sense” is that the court’s is an “overly narrow view of the insider-trading law, and that is a concern.”

Still, she acknowledged, “there is no question it’s a significant decision.”

The Second Circuit found that there was not enough evidence to convict Chiasson and Newman—because the trial-court judge mistakenly found that the law didn’t require the two to know that the sources of the confidential information they traded on received a personal benefit. Insider-trading does require such knowledge, it found, a decision which also imperils the conviction of former SAC Capital Advisors trader Michael Steinberg, who was found to be a member of the same “corrupt circle” as Chiasson and Newman.

Their vindication also voids the settlement they reached with the SEC last year.

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