Terry Lynam Quoted by Law360 on 2nd Circuit Insider Trading Ruling

Law360, for its article “Attorneys React To 2nd Circ.’s Insider Trading Ruling,” quoted Akin Gump litigation partner Terry Lynam on the significance of a 2nd Circuit insider trading ruling. The ruling overturned the conviction of two hedge fund managers and imposed a stricter standard when it comes to prosecuting those who are one or more layers removed from sources of confidential information.

Lynam noted the three ways in which the ruling will affect the prosecution of remote tippees:

• “[T]he government must now clearly prove knowledge by the tippee that the insider who breached his duty received a benefit.”
• “[T]he often used argument that the benefit can simply be the satisfaction of helping a friend, was rejected as the court clearly indicated that more of a quid pro quo arrangement will be required.”
• “[T]he court also recognized that companies often selectively disclose (i.e., leak) inside information for the company’s benefit.”

Lynam added, “All of these principles provide opportunities for the defendants in these cases.”