Second Circuit Lowers the Bar for Charging Criminal Insider Trading
Client Memorandum

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On December 30, 2019, the United States Court of Appeals for the Second Circuit affirmed the convictions of four individuals charged with disclosing and trading on nonpublic government information, adding a new twist to decades of judicial precedent on the definition of insider trading. The court held that the "personal-benefit" test for insider trading established by the Supreme Court in Dirks v. SEC does not apply to wire and securities fraud under Title 18 of the U.S. Code. The ruling will make it easier for the government to prosecute insider trading even when there is no clear benefit to the source who provided the information.