LOOKING BACK -

“The crime of insider trading is a straightforward concept that some courts have somehow managed to complicate.” So lamented United States District Court Judge Jed Rakoff in December 2018. His unorthodox first sentence of a decision denying a motion to dismiss an insider trading indictment in fact understates the ambiguity and confusion that pervades the law of insider trading. Grappling with the uncertainties created by a line of cases following the U.S. Court of Appeals for the Second Circuit’s controversial 2014 opinion in United States v. Newman, judges in the Second Circuit found themselves having to determine the criminal culpability of a defendant—as they did for Mathew Martoma—based in part on close consideration of what it means to be a friend. Perhaps because of this uncertainty—what former U.S. Attorney Preet Bharara referred to as “[t]he shoddy state of American insider-trading law”—the types of cases brought by the Department of Justice (“DOJ”) in 2018 were relatively safe cases that did not test the outer limits of the puzzling state of insider trading law.

Civil insider trading cases in 2018 did not yield significant changes in the law. As has been the growing trend over the past few years, the Securities and Exchange Commission (“SEC”) chose to bring the overwhelming proportion of its insider trading enforcement cases as either settled matters or actions filed in parallel with a criminal matter. Not surprisingly, the SEC’s recent pursuit of fewer contested SEC-only cases led to fewer court opinions examining how the evolving law of insider trading applies in a civil enforcement action. If you are looking for an SEC insider trading trial in 2018, you will not find one—the SEC tried a grand total of zero insider trading cases in 2018. The lack of trials or of reported decisions involving the SEC does not, however, mean that the SEC is no longer enforcing laws against insider trading. Rather, the SEC’s efforts largely manifest themselves in civil complaints alongside criminal indictments and in settled actions, as well as through investigations that lead to criminal referrals. The SEC’s insider trading enforcement efforts in 2018 kept pace with its efforts in prior years.