Whether a fund can trade on material nonpublic information is one of the more challenging calls faced by hedge fund compliance personnel. Last December, a panel of the U.S. Court of Appeals for the Second Circuit dismissed the insider trading case against Todd Newman and Anthony Chiasson, hedge fund portfolio managers and remote tippees who had traded on inside information about Dell and Nvidia. That Court recently denied the government’s request to reconsider the decision. Thus, absent a successful appeal to the Supreme Court, to win a conviction against a remote tippee in tipper-tippee insider trading cases in the Second Circuit, the government must prove that the tippee knew that the insider had received a benefit from the improper tip and that the benefit was “of some consequence.” See “Second Circuit Overturns Newman and Chiasson Convictions, Raising Government’s Burden of Proof in Tippee Liability Insider Trading Cases
,” Hedge Fund Law Report, Vol. 7, No. 47 (Dec. 18, 2014). A panel of experts from the law firm Richards Kibbe & Orbe (RK&O) recently discussed the implications of that decision for compliance with insider trading rules and explored how a subsequent district court decision in a civil insider trading action applied the principles enunciated in U.S. v. Newman and Chiasson
. The program was moderated by Lee S. Richards, III, RK&O partner and former Assistant U.S. Attorney in the Southern District of New York. The other panelists were RK&O partners Scott C. Budlong; Michael D. Mann, a former Director of International Affairs and Associate Director in the SEC’s Division of Enforcement; and David B. Massey, a former Assistant U.S. Attorney in the Southern District of New York. This article summarizes the key takeaways from the program.