Under well-established precedent, a key element of tipper-tippee insider trading liability is that the insider (tipper) must receive some personal benefit from the tip; a benefit may be inferred from a gift of information to a relative or friend. In December 2014, the U.S. Court of Appeals for the Second Circuit (Second Circuit) reversed the insider trading convictions of Todd Newman and Anthony Chiasson, hedge fund portfolio managers who had been convicted of trading on inside information on Dell and NVIDIA earnings, finding that the Government had failed to prove awareness of such benefit. 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). The Government has petitioned the Supreme Court to review the Second Circuit’s decision. This article summarizes the Government’s petition, with an emphasis on its arguments as to why the Supreme Court should take the appeal. For a discussion of the practical effect of the decision, see “The Newman/Chiasson Decision Continues to Have Implications for Insider Trading Compliance
,” Hedge Fund Law Report, Vol. 8, No. 17 (Apr. 30, 2015). For coverage of the civil enforcement actions relating to the alleged insider trading, see “SEC Files Civil Insider Trading Complaint Against Diamondback Capital Management, Level Global Investors and Seven Individuals Based on Trading in Dell and Nvidia; Diamondback Strikes Non-Prosecution Deal with U.S. Department of Justice and Settles with the SEC for $9 Million
,” Hedge Fund Law Report, Vol. 5, No. 4 (Jan. 26, 2012); and “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).