[JURIST] The US Court of Appeals for the Second Circuit [official website] on Wednesday overturned [opinion, PDF] the insider trading convictions of two former hedge fund traders. Defendants Todd Newman and Anthony Chiasson were convicted in May 2013 on charges of “conspiracy to commit insider trading and insider trading in violation of 18 USC § 371 [text], sections 10(b) and 32 of the Securities Exchange Act of 1934 [text, PDF], SEC Rules 10b-5 and 10b5-2, and 18 USC § 2 [text].” The three-judge panel unanimously ruled that the jury instruction at the trial level was erroneous, conclude instead that, in order to prove a conviction for insider trading, the government must “prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit.” Under this articulated standard, the appeals court concluded the evidence was insufficient to sustain a guilty verdict against the two defendants. The decision could possibly lead to the reversal [NYT report] of the 2013 insider trading conviction of Michael Steinberg who stood before the same judge who presided over Newman and Chiasson’s trial.

Insider trading is an international concern among securities regulators. In October the trial involving allegations of insider trading in shares of Airbus Group [corporate website] began [JURIST report] after an eight-year investigation. In July a judge for the US District Court for the Southern District of New York [official website] dismissed [JURIST report] two securities fraud counts against Rengan Rajaratnam, the brother Raj Rajaratnam [JURIST news archive], the founder of the now defunct Galleon Group. Last December a French court ordered a trial [JURIST report] for German car maker Dailmer AG and French industrial conglomerate Lagardere SCA [corporate websites], shareholders in EADS for insider trading.