If fear of prison was the only thing stopping you from trying to get rich on insider trading, then a federal appeals court just gave you the green light. On Wednesday, a three-judge panel at the US Court of Appeals for the Second Circuit in Manhattan gave a thumbs-up to market manipulation by unanimously throwing out the insider trading convictions of former hedge fund analysts Todd Newman and Anthony Chiasson. The duo were convicted of trading on tips disseminated by a network of analysts. At the original trial, judge Richard Sullivan told the jury that it could convict Newman and Chiasson if prosecutors proved that the accused knew the tips weren’t public and that the leak violated a fiduciary duty.
In great news to ethically-challenged stock traders everywhere, the appeals court deemed those jury instructions incorrect. Although the appeal took about a day longer than anticipated because the judges granted a recess during market hours to allow the litigants to trade their personal accounts, the result never really appeared in doubt. As reported by the New York Post yesterday, the newest best friends of financial scammers ruled that:
Securities lawyer Mark Rifkin of Wolf Haldenstein Adler Freeman & Herz LLP told the New York Post: “Insider trading is now unprosecutable against those who insulate themselves by going through a middleman.”
Rifkin was unavailable for further comment because he still hasn’t finished pronouncing his firm’s name.
Novice Fawcett, the Frank Abagnale Professor of Law at Southwest Jersey Law School of the Northeast sat down with Bud Fox News to discuss the implications of the appeals court’s decision. Professor Fawcett was candid in his assessment:
“This was an interesting decision. I wonder what this panel will do for an encore? Free Madoff and appoint him CFO of Boston Children’s Hospital? As you know, the appeals court stated that for a crime to be committed, the tippee must know that the tipper benefited from the leak. In this specific case, I’d tell you to check the judges’ bank accounts because I can’t help but wonder if they directly benefited from helping out the judgees.”
When asked whether he was suggesting that the judges could have been bribed, Professor Fawcett, apparently distracted by a text message, changed the topic:
“Wow, a faculty colleague just sent me a text that Sears is going to announce a takeover bid for Target next week. He heard about it from an associate professor over at the State Normal School for Women who heard from some guy at a law firm who heard about it from a magician named Steve Cohen. I don’t know whether this Cohen guy benefits in any way, so let me just do a quick thing in my E*TRADE account and we can get back to your question.”