Financial sector holds its breath for Supreme Court’s upcoming insider trading decision

On Behalf of | Oct 9, 2016 | white collar crimes

The country’s highest court is about to decide its first insider trading case in almost two decades.

Financial and legal professionals all over the country will be keeping a close eye on the Supreme Court as the justices consider a case that could affect insider trading charges. The Court heard arguments Wednesday in a case that could refine the scope of federal white collar crimes.

The justices will determine whether a person can be sent to prison for insider trading if the insider who provided the stock tip did not expect any money in return for the information. The defendant, a grocery wholesaler in Chicago, made stock purchases based on advice he got from a relative.

According to Crain’s Chicago Business, the prosecution alleges that the defendant and a business partner profited more than $1.5 million through trades based on insider information. The information came from an investment banker, who passed it on to his brother, who passed it on to the defendant, his brother-in-law.

So far, the courts haven’t been able to agree on whether this is insider trading because the source of the information did not receive any concrete benefit for sharing it. The Supreme Court’s decision will be critical in defining insider trading for future cases.

The changing legal landscape for insider trading

The Supreme Court hasn’t heard an insider trading case in nearly 20 years. In their last ruling on the subject, in 1997, they approved a legal theory that made many more people vulnerable to prosecution for insider trading.

In 2014, however, a Manhattan-based federal appeals court set new requirements for insider trading convictions that scaled back the ability of federal prosecutors to get convictions. This led to more than a dozen convictions being thrown out.

Will the Court apply the same standards in their ruling, or put more power back into the hands of prosecutors? We’ll be keeping an eye on the case, and anyone with access to insider information should do the same to avoid federal criminal charges.

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