Category: Appellate Decision
Split Second Circuit Affirms Insider Trading Conviction While Rejecting Newman’s “Meaningfully Close Personal Relationship” Requirement
On August 23, 2017, the United States Court of Appeals for the Second Circuit affirmed an insider trading conviction against a portfolio manager, and in doing so, held that the “meaningfully close personal relationship” requirement set forth in the Second Circuit’s landmark decision, United States v. Newman, to infer personal benefit “is no longer good law.”
Matthew Martoma (“Martoma”) managed an investment portfolio at S.A.C. Capital Advisors, LLC (“SAC”) that focused on pharmaceutical and healthcare companies. His “conviction stem[s] from an insider trading scheme involving securities of two pharmaceutical companies, Elan Corporation, plc (“Elan”) and Wyeth, that were jointly developing an experimental drug called bapineuzumab to treat Alzheimer’s disease.” During the development of bapineuzumab, Martoma arranged for consultation visits paid by SAC with two doctors who were working on the clinical trial. One doctor was the chair of the safety monitoring … Read More »
Eleventh Circuit Defines “Instrumentalities” of Foreign Government for the Purposes of the Foreign Corrupt Practices Act
In general, the Foreign Corrupt Practices Act (“FCPA”) prohibits the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any improper advantage in order to obtain or retain business. See 15 U.S.C. § 78dd-1. “Foreign official” is defined as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof . . . .” Id. at §78dd-1(f)(1)(A) (emphasis added). The DOJ and SEC have routinely relied on the term “instrumentality” to charge unlawful payments made to employees of various state-owned entities, such as employees of state-owned hospitals, oil companies, and telecommunication companies.
According to the Resource Guide issued by the Criminal Division of the DOJ and the Enforcement Division of the SEC, whether a … Read More »
The Fourth Circuit Court of Appeals this week rejected the bid of a securities lawyer to vacate his guilty plea on the ground that the conduct to which he pled guilty was no longer criminal under the U.S. Supreme Court’s decision in Janus Capital Group, Inc. v. First Derivative Traders, 131 S.Ct. 2296 (2011). The Fourth Circuit’s decision strengthens the DOJ’s and the SEC’s position that Janus is limited to private litigants.
In Janus, the U.S. Supreme Court held that in a private action under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder—which make it unlawful, among other things, for any person to “make any untrue statement of a material fact” in connection with the purchase or sale of securities—the “maker” is the person or entity with ultimate authority over the statement, including its content and … Read More »
On April 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit issued its opinion in the conflicts minerals case, National Association of Manufacturers, et al., v. Securities and Exchange Commission. The Court of Appeals upheld most aspects of the statute and the rule, but found that the statute and rule violate the First Amendment “to the extent that the statute and rule require regulated entities to report to the Commission and to state on their website that any of their products have not been found to be ‘DRC conflict free.’” The Court of Appeals remanded the case to the U.S. District Court for the District of Columbia for further proceedings consistent with its opinion. As of this time, there is no reprieve for issuers from the requirement to file a Form SD or conflict minerals report with the … Read More »