1 00:00:00,080 --> 00:00:02,960 Speaker 1: Now it's time for our daily Bloomberg Law Brief, exploring 2 00:00:03,040 --> 00:00:06,000 Speaker 1: legal issues in the news, and today we discuss former 3 00:00:06,200 --> 00:00:11,039 Speaker 1: sac Capital Adviser's portfolio manager Matthew Mark Thomas lost a 4 00:00:11,039 --> 00:00:14,120 Speaker 1: bid to overturn his insider trading conviction. It's giving a 5 00:00:14,120 --> 00:00:16,640 Speaker 1: boost a federal prosecutor seeking to clean up a legal 6 00:00:16,680 --> 00:00:19,319 Speaker 1: behavior on Wall Street. For more in the case and 7 00:00:19,320 --> 00:00:22,760 Speaker 1: its implications for a future insider trading litigation, Bloomberg Law 8 00:00:22,800 --> 00:00:26,120 Speaker 1: hosting Grosso speaks with John Coffee, a professor at Columbia 9 00:00:26,200 --> 00:00:29,440 Speaker 1: Law School, and Robert Howckett, a professor at Cornell University 10 00:00:29,520 --> 00:00:32,839 Speaker 1: Law School. John, the question of what has to be 11 00:00:32,880 --> 00:00:35,560 Speaker 1: proven in an insider trading case has gone all the 12 00:00:35,560 --> 00:00:38,199 Speaker 1: way up to the Supreme Court, So take us on 13 00:00:38,240 --> 00:00:42,000 Speaker 1: a short journey to explain where it stands fair enough 14 00:00:42,360 --> 00:00:45,560 Speaker 1: and it really does change the law significantly to favor 15 00:00:45,640 --> 00:00:49,920 Speaker 1: the prosecution. Prior to this case, the Supreme Court, both 16 00:00:49,920 --> 00:00:53,760 Speaker 1: in its Dirk's decision back in and in the Solomon 17 00:00:53,840 --> 00:00:57,760 Speaker 1: decision that had handed down last year, both emphasized that 18 00:00:57,880 --> 00:01:00,640 Speaker 1: the prosecution had to prove not so plea that the 19 00:01:00,720 --> 00:01:05,640 Speaker 1: defendant used material and non public information to trade, but 20 00:01:05,920 --> 00:01:11,200 Speaker 1: that the tipper had received some personal benefit from the tippy. 21 00:01:11,440 --> 00:01:15,080 Speaker 1: Other words, that was distinguishing between mere gossip and a 22 00:01:15,160 --> 00:01:18,039 Speaker 1: kind of predatory theft where you bribed an insider to 23 00:01:18,080 --> 00:01:21,440 Speaker 1: get the information from the company. They recognized also both 24 00:01:21,480 --> 00:01:24,360 Speaker 1: those decisions that there could be a special exception, a 25 00:01:24,440 --> 00:01:27,440 Speaker 1: gift by an insider to his relatives or close friends. 26 00:01:27,959 --> 00:01:31,440 Speaker 1: That seemed like a small case. What's now happened is 27 00:01:31,520 --> 00:01:35,039 Speaker 1: that even after Dirk's and Solmon, the Martoma decision says 28 00:01:35,160 --> 00:01:39,280 Speaker 1: that any time information is given to anyone who is 29 00:01:39,440 --> 00:01:42,080 Speaker 1: likely to trade based on it, that you expect will 30 00:01:42,080 --> 00:01:45,240 Speaker 1: trade based on it, that will be treated as a gift. 31 00:01:45,360 --> 00:01:48,040 Speaker 1: The prior case law, or at least the Newman decision 32 00:01:48,080 --> 00:01:51,000 Speaker 1: in the Second Circuit, had said that it's only when 33 00:01:51,000 --> 00:01:53,520 Speaker 1: you gave information to someone with whom you had a 34 00:01:53,520 --> 00:01:57,520 Speaker 1: meaningful close relationship. That's gone. Now. It could be a 35 00:01:57,640 --> 00:02:00,640 Speaker 1: casual acquaintance, it can be anyone that you know if 36 00:02:00,640 --> 00:02:02,680 Speaker 1: you have a reason to believe they're likely to trade 37 00:02:02,680 --> 00:02:06,160 Speaker 1: on this information. So we will have the prosecution using 38 00:02:06,200 --> 00:02:09,360 Speaker 1: a totally different theory, never having to prove a personal benefit, 39 00:02:09,600 --> 00:02:12,080 Speaker 1: but just saying this was a gift of information and 40 00:02:12,160 --> 00:02:16,000 Speaker 1: therefore they are liable. Bob and tell us about Martoma's appeal. 41 00:02:16,240 --> 00:02:18,959 Speaker 1: The appeal is essentially based on the change in the 42 00:02:19,040 --> 00:02:21,960 Speaker 1: law that John just mentioned right. So, at the time 43 00:02:22,120 --> 00:02:25,359 Speaker 1: that the original conviction was one, the jury was instructed 44 00:02:25,560 --> 00:02:27,799 Speaker 1: to make its decision on the basis of the law 45 00:02:27,880 --> 00:02:30,920 Speaker 1: as it then stood. So what we have now is 46 00:02:31,040 --> 00:02:34,680 Speaker 1: the destendant arguing that, well, the law has actually changed 47 00:02:34,840 --> 00:02:38,200 Speaker 1: during the course of his appeal from the earlier decision, 48 00:02:38,320 --> 00:02:40,560 Speaker 1: and that therefore, since the law has changed during the 49 00:02:40,600 --> 00:02:42,600 Speaker 1: course of that appeal, there should be a new trial 50 00:02:42,800 --> 00:02:45,080 Speaker 1: with a new jury that will be instructed to pursue 51 00:02:45,080 --> 00:02:48,400 Speaker 1: it to the dictates of the new law. As Robert Hawckett, 52 00:02:48,400 --> 00:02:51,600 Speaker 1: a professor at Cornell University Law School, and John Coffee, 53 00:02:51,639 --> 00:02:54,680 Speaker 1: a professor at Columbia Law School, speaking with Bloomberg Law 54 00:02:54,720 --> 00:02:57,120 Speaker 1: Houster in Grosso. You can listen to Bloomberg Law weekdays 55 00:02:57,160 --> 00:03:00,560 Speaker 1: at one pm all street time here on Bloomberg Radio, 56 00:03:01,000 --> 00:03:03,120 Speaker 1: and that is this morning is Bloomberg Law Brief. You 57 00:03:03,120 --> 00:03:05,600 Speaker 1: can find more legal news at Bloomberg Law dot com 58 00:03:05,600 --> 00:03:09,160 Speaker 1: and Bloomberg BNA dot com. Attorneys will find exceptional legal 59 00:03:09,160 --> 00:03:12,480 Speaker 1: research and business development tools there as well. Visit Bloomberg 60 00:03:12,560 --> 00:03:15,600 Speaker 1: law dot com and Bloomberg BNA dot com for more information.