Second Circuit Holds that Portfolio Manager Who Engaged in Insider Trading to Benefit His Fund Is Personally Liable to Disgorge the Fund’s Illicit Profits, Regardless of How Much He Gained Personally

A recent Second Circuit decision clarified the circumstances in which a hedge fund manager who engages in insider trading to benefit the fund can be held liable to disgorge all of the fund’s illicit profits, even if the manager does not personally receive any of those profits.  This article summarizes the court’s decision.  In a substantively related matter, the SEC is presently seeking disgorgement by a Level Global trader of illicit profits made by that fund as a result of insider trading by that trader.  See “SEC’s Insider Trading Suit against Former Level Global Trader Illustrates the Risk of Retaining a Former Public Company Employee as a Consultant,” Hedge Fund Law Report, Vol. 6, No. 47 (Dec. 12, 2013).

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