ARTICLE
13 December 2010

SEC and DOJ Insider Trading Investigations - What You Need to Know

As all of you have read, the SEC and the Department of Justice (DOJ) are conducting a nationwide series of insider trading investigations relating to the use by hedge funds and other investors of third-party research firms (so-called "expert networks").
United States Finance and Banking

As all of you have read, the SEC and the Department of Justice (DOJ) are conducting a nationwide series of insider trading investigations relating to the use by hedge funds and other investors of third-party research firms (so-called "expert networks"). The government is investigating, among other issues, whether the research, often paid with soft dollars, constitutes inside information, which could trigger criminal or civil insider trading liability for the hedge funds that use the research.

In the past, what constituted insider trading usually was a straightforward analysis - the investor knew the information was nonpublic and material, but traded anyway. Those types of situations are likely part of this investigation. But, the SEC and DOJ may also be attempting to expand the traditional use of insider trading statutes to third-party research where the recipient was not aware that the research it received was based on material, nonpublic information.

You may have situations with your portfolio investing where you are unsure as to the scope of insider trading laws and how they might be applied to you.

Our securities litigation group is very familiar with the relevant cases and has followed the recent investigations that have received so much publicity. They are available to help you understand the scope of those statutes, answer your questions and develop protocols to give you the comfort that you are not inadvertently exposing your firm to possible prosecution or civil liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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