Although the U.S. Court of Appeals for the Second Circuit’s most recent decision in U.S. v. Blaszczak
2) generated significant attention for its holding that a government agency’s confidential information is not necessarily government “property” for purposes of criminal liability for Title 18 securities fraud, the more important lessons for hedge funds that engage political intelligence or any expert insights to inform their trading come from the earliest days of the case and the questions the Second Circuit left open. Firms that strengthened their compliance policies and procedures for conducting research on government actions when the Blaszczak investigation and eventual civil and criminal charges were announced should continue to stay the course, as Blaszczak
2 does not negate insider trading risk under Title 15 of the United States Code. Firms that did not, however, should take this opportunity to do so, as the concurring and dissenting opinions in Blaszczak
2 reveal unresolved tensions among the judiciary regarding the propriety and value of political intelligence firms for the financial markets. This guest article by Jenny R. Chou, partner at Wiggin and Dana, LLP, summarizes the history of the Blaszczak cases, identifies lessons from the litigation for hedge fund managers and posits several unanswered questions left in the wake of the latest decision. For more on Blaszczak
2, see “Second Circuit Holds That Certain Political Intelligence Is Not ‘Property’ Under Title 18
” (Feb. 16, 2023).