Insider Trading Defendants Missing Out on Potential Defense

The government scored another insider trading conviction earlier this month when a jury found Doug Whitman guilty of sharing confidential information. It’s the eighth win in a row for the U.S. Attorney’s Office for the Southern District of New York, giving prosecutors an impressive 8-0 record. Benjamin Fischer (Morvillo Abramowitz) asks why those accused of insider trading are not invoking what could be a possible line of defense for their actions:

“In the aftermath of [the latest] convictions, defendants and defense lawyers have been left to wonder whether they stand any chance to defeat an insider trading charge. One defense—endorsed last year by a federal appellate court—may well resonate with jurors in a way that other defenses have not. Last September, a federal appellate court held in United States v. Gansman …  that a rule promulgated by the Securities and Exchange Commission recognized an often unstated reality: that family members and close personal friends have legitimate expectations of confidentiality in their communications. The Court found that under SEC Rule 10b5-2, it is not illegal or improper to convey non-public information to a person with whom you maintain a ‘relationship of trust and confidence,’ particularly where the parties have had a ‘history, pattern, and practice of exchanging confidences.’”

Read the full update, Insider Trading: Are “Relationships of Trust and Confidence” the Last Line of Defense? - Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C.