[JURIST] US Attorney for the Southern District of New York Preet Bharara [official profile] on Thursday dropped [press release] a high-profile insider trading case, stating that he is moving to dismiss the charges against seven defendants. The defendants are former SAC Capital Advisors LP (now Point72 Asset Management) [official website] portfolio manager Michael Steinberg and six analysts. Bharara decided to move to dismiss the charges due to the changing legal landscape and how it has become harder for prosecutors to prove insider trading. He cited the United States v. Newman [opinion, PDF] decision that was issued in December 2014 by the US Court of Appeals for the Second Circuit [official website]. In Newman, the court overturned convictions of insider trading against two hedge-fund traders. The practical implication of the Newman ruling is a higher bar for prosecutors [WSJ report] in insider trading cases. Bharara stated:

The decision to dismiss these charges follows the Second Circuit’s Newman decision, and also reflects determinations, after careful consideration of all of our prior insider trading prosecutions, that insisting on maintaining guilty pleas in these cases would not be in the interests of justice. These prosecutions were all undertaken in good faith reliance on what this Office and others, including able defense counsel for all those who pled guilty, understood to be the well-settled law before Newman.”

Insider trading is an international concern among securities regulators. Earlier this month the US Supreme Court rejected [JURIST report] an appeal by the US Department of Justice to review the Second Circuit’s decision. In July the US District Court for the Eastern District of Pennsylvania issued an indictment [JURIST report] against real estate agent Herbert Sudfeld for alleged insider trading, with charges including securities fraud, three counts of making false statements to the FBI, and aiding and abetting. In April the Supreme Court denied certiorari [JURIST report] in an appeal brought by Rajat Gupta, the former director of Goldman Sachs Group, Inc., for his 2012 insider trading conviction. In January the Supreme Court rejected another appeal [JURIST report] by Gupta, leaving in place a lifetime ban on serving as an officer or director of a public company that stems from the civil case against him by the Securities and Exchange Commission.