Second Circuit Evaluates Whether Hedge Fund Employee Who Pled Guilty to Insider Trading Is Responsible for Reimbursing Morgan Stanley for Compensation and Legal Expenses

The Second Circuit Court of Appeals (Court) recently considered a decision by the U.S. District Court for the Southern District of New York holding that Joseph “Chip” Skowron is responsible for reimbursing his former employer $10 million in compensation and legal expenses incurred in defending Skowron as a result of the SEC’s investigation into his insider trading.  Among other things, the Court evaluated to what extent the Mandatory Victims Restitution Act is available to employers that wish to claw back compensation from their employees for illegal conduct.  See “Structuring, Drafting and Enforcement Recommendations for Hedge Fund Managers Considering Employee Compensation Clawbacks (Part One of Two),” Hedge Fund Law Report, Vol. 6, No. 31 (Aug. 7, 2013).  This article outlines the factual and procedural background in this case as well as the legal analysis underpinning the Court’s decision.

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