I came across this story about two Defendants in New York who were appealing to the Second Circuit Court of Appeals their convictions for “insider trading”, which as we all know is a rarely prosecuted federal crime arising out of a securities investigation that usually starts with the SEC. These Defendants also argued on appeal that their sentences were too long. Both issues, the insider trading question and sentencing arguments, are matters we have come across frequently, and we will be following the case closely.
The basic idea of an “insider trading” case is that someone learns about “material non-public information”, such as the fact that one company might be in the process of buying another company. When companies prepare to engage in such moves, they need to hire bankers, lawyers, accountants, printers and lots of folks who work on the deal. It is illegal for anyone who learns such “material non-public” information to give a “tip” to anyone, and for the recipient of the tip (the “tippee”) to make trades (such as buying the stock of the company that is about to be purchased.)