Financial Fraud Law Report: October 2013 - Insider Trading in Mutual Funds: Do Traditional Theories Apply?

A federal court of appeals recently held out the possibility that insider trading prohibitions — at least under the classic theory — do not apply to mutual fund redemptions.

The U.S. Court of Appeals for the Seventh Circuit reversed and remanded summary judgment granted to the Securities and Exchange Commission (“SEC”) in a case alleging that a mutual fund’s chief compliance officer (“CCO”) improperly redeemed fund shares while in possession of material non-public information. The appellate court directed the district court to address the novel issue of whether Section 10(b) of the Securities Exchange Act of 1934 applies to insider trading in mutual fund shares.

Originally published in the Financial Fraud Law Report on October 23, 2013.

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Topics:  Chief Compliance Officers, Compliance, Fraud, Insider Trading, Mutual Funds, Rule 10b-5, SEC, Securities Exchange Act, White Collar Crimes

Published In: Business Torts Updates, Civil Procedure Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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