The U.S. Court of Appeals for the Second Circuit’s ruling in U.S. v. Martoma
in August 2017 raises the prospect that defendants in insider trading cases can no longer rely on defenses established in U.S. v. Newman
. See “In U.S. v. Martoma, Second Circuit Eliminates ‘Meaningfully Close Personal Relationship’ Element Articulated in Newman for Insider Trading Prosecutions
” (Sep. 14, 2017). The elimination of the requirement that the government must prove a meaningfully close personal relationship between tipper and tippee in order to bring an insider trading conviction is especially significant for hedge funds that employ outside networks for information to inform trading strategies and decisions. In the complex post-Martoma
compliance landscape, fund general counsels and chief compliance officers must implement measures that adapt to the monumental changes in insider trading law, minimize compliance risk and shield themselves from the kinds of ruinous enforcement actions that have plagued some of the largest investment advisers in recent months. All of these points came across in a panel discussion sponsored by the Hedge Fund Law Report and MoloLamken. Moderated by William V. de Cordova, Editor-in-Chief of the Hedge Fund Law Report, the panel featured Katherine Goldstein
, partner at Milbank Tweed Hadley & McCloy; Brian Guzman
, general counsel of Indus Capital Partners; Brendan Kalb
, managing director and general counsel of AQR Capital Management; and Justin Shur
, partner at MoloLamken. This article summarizes the key takeaways from the discussion. For more on insider trading, see “Hedge Fund Manager Deerfield Fined $4.7 Million for Failing to Adopt Insider Trading Compliance Policies Tailored to the Firm’s Specific Risks
” (Sep. 21, 2017); and “How Can Hedge Fund Managers Distinguish Between Market Color and Inside Information?
” (Nov. 19, 2009).