Divided Second Circuit Broadens Personal Benefit Test for Insider Trading Liability

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The court’s Martoma decision reinvigorates the US government’s ability to prosecute insider trading cases.

Key Points:

- The majority opinion overrules recent case law requiring that an insider have a meaningfully close relationship with a tippee and receive an objective and consequential benefit, while leaving intact the separate requirement that a tippee know of the personal benefit to the insider.

- A vigorous dissent warns of the government’s potentially overbroad application of insider trading authority.

- The decision should serve as a reminder to company insiders and market professionals that any discussion involving confidential company information can lead to a lengthy and intrusive insider trading investigation.

Please see full publication below for more information.

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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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