WEBVTT - Bloomberg Law Brief: Insider Trading Litigation (Audio)

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<v Speaker 1>Now it's time for our daily Bloomberg Law Brief, exploring

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<v Speaker 1>legal issues in the news, and today we discuss former

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<v Speaker 1>sac Capital Adviser's portfolio manager Matthew Mark Thomas lost a

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<v Speaker 1>bid to overturn his insider trading conviction. It's giving a

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<v Speaker 1>boost a federal prosecutor seeking to clean up a legal

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<v Speaker 1>behavior on Wall Street. For more in the case and

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<v Speaker 1>its implications for a future insider trading litigation, Bloomberg Law

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<v Speaker 1>hosting Grosso speaks with John Coffee, a professor at Columbia

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<v Speaker 1>Law School, and Robert Howckett, a professor at Cornell University

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<v Speaker 1>Law School. John, the question of what has to be

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<v Speaker 1>proven in an insider trading case has gone all the

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<v Speaker 1>way up to the Supreme Court, So take us on

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<v Speaker 1>a short journey to explain where it stands fair enough

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<v Speaker 1>and it really does change the law significantly to favor

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<v Speaker 1>the prosecution. Prior to this case, the Supreme Court, both

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<v Speaker 1>in its Dirk's decision back in and in the Solomon

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<v Speaker 1>decision that had handed down last year, both emphasized that

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<v Speaker 1>the prosecution had to prove not so plea that the

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<v Speaker 1>defendant used material and non public information to trade, but

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<v Speaker 1>that the tipper had received some personal benefit from the tippy.

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<v Speaker 1>Other words, that was distinguishing between mere gossip and a

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<v Speaker 1>kind of predatory theft where you bribed an insider to

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<v Speaker 1>get the information from the company. They recognized also both

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<v Speaker 1>those decisions that there could be a special exception, a

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<v Speaker 1>gift by an insider to his relatives or close friends.

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<v Speaker 1>That seemed like a small case. What's now happened is

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<v Speaker 1>that even after Dirk's and Solmon, the Martoma decision says

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<v Speaker 1>that any time information is given to anyone who is

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<v Speaker 1>likely to trade based on it, that you expect will

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<v Speaker 1>trade based on it, that will be treated as a gift.

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<v Speaker 1>The prior case law, or at least the Newman decision

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<v Speaker 1>in the Second Circuit, had said that it's only when

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<v Speaker 1>you gave information to someone with whom you had a

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<v Speaker 1>meaningful close relationship. That's gone. Now. It could be a

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<v Speaker 1>casual acquaintance, it can be anyone that you know if

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<v Speaker 1>you have a reason to believe they're likely to trade

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<v Speaker 1>on this information. So we will have the prosecution using

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<v Speaker 1>a totally different theory, never having to prove a personal benefit,

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<v Speaker 1>but just saying this was a gift of information and

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<v Speaker 1>therefore they are liable. Bob and tell us about Martoma's appeal.

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<v Speaker 1>The appeal is essentially based on the change in the

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<v Speaker 1>law that John just mentioned right. So, at the time

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<v Speaker 1>that the original conviction was one, the jury was instructed

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<v Speaker 1>to make its decision on the basis of the law

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<v Speaker 1>as it then stood. So what we have now is

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<v Speaker 1>the destendant arguing that, well, the law has actually changed

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<v Speaker 1>during the course of his appeal from the earlier decision,

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<v Speaker 1>and that therefore, since the law has changed during the

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<v Speaker 1>course of that appeal, there should be a new trial

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<v Speaker 1>with a new jury that will be instructed to pursue

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<v Speaker 1>it to the dictates of the new law. As Robert Hawckett,

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<v Speaker 1>a professor at Cornell University Law School, and John Coffee,

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<v Speaker 1>a professor at Columbia Law School, speaking with Bloomberg Law

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<v Speaker 1>Houster in Grosso. You can listen to Bloomberg Law weekdays

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<v Speaker 1>at one pm all street time here on Bloomberg Radio,

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<v Speaker 1>and that is this morning is Bloomberg Law Brief. You

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<v Speaker 1>can find more legal news at Bloomberg Law dot com

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