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Former SDNY U.S. Attorney Preet Bharara Task Force on Insider Trading

Former SDNY U.S. Attorney Preet Bharara and SEC Commissioner Jackson recently announced, via NY Times op-ed, the creation of the Bharara Task Force on Insider Trading.  Based on the premise that U.S. insider trading laws are unclear and hopelessly out of date, the task force intends to propose new insider trading reforms to help clarify the laws and protect American investors.

Jackson and Bharara recognize that individuals facing liability should have more clarity about what the law is.  For those of us who regularly advise fund managers on compliance with insider trading rules, more clarity would be a welcome development.

One of the hardest questions to answer is when seeking information through diligent research potentially moves into a gray area of improper material non-public information.  Under current US law, the answer is often: maybe, it depends.  And much of that determination depends on information that a fund analyst may not control or even have access to – for example, whether information was initially shared in violation of some duty of trust or confidence, whether there was a “benefit” to an insider, etc.  While ignorance of the law is not a defense, even experienced securities law practitioners can get tripped up by the complicated patch-work that is the current insider trading law.

Fund managers have an obligation to their clients to make the best investment decisions that they can.  Their job is to make the right investment decisions for their clients, and conducting diligent research is a large part of that job.  With that in mind, we welcome the task force’s efforts to clarify the insider trading laws.  In our experience, when managers have clear guidance on what is and isn’t allowed, they will stay on the right side of the law.

© 2018 Proskauer Rose LLP.

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About this Author

Joshua Newville, Proskauer Rose, regulatory enforcement attorney, industry compliance legal counsel, securities exchange commission lawyer
Partner

Joshua M. Newville is a partner in the Litigation Department in New York. His practice focuses on commercial litigation and regulatory investigations. Mr. Newville advises companies and individuals in securities litigation and compliance matters. He also focuses on internal investigations and enforcement matters. Prior to joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset...

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Samuel Waldon, Proskauer Law Firm, Washington DC, Corporate Law and Litigation Attorney
Partner

Sam Waldon is a partner in the Litigation Department and a member of the Securities Litigation, White Collar Defense & Investigations and Asset Management Litigation Groups.

Sam’s practice focuses on securities litigation, enforcement and regulatory matters. He represents corporations and financial institutions, and their officers, directors and employees, in investigations, exams, internal investigations and litigation. Sam has in-depth experience in a broad range of Securities and Exchange Commission (SEC) enforcement matters, including financial disclosure, accounting, investment adviser, asset management, private equity, broker dealer, FCPA, cyber-related misconduct, insider trading and market abuse.

Before joining Proskauer, Sam served as Assistant Chief Counsel in the SEC’s Division of Enforcement for eight years. In that role, Sam helped develop and implement many of the Division’s policies and procedures, and advised the Division’s senior leadership, investigative staff and trial unit attorneys on a wide range of legal and policy issues. He regularly provided guidance on the terms of negotiated settlements and charging decisions in litigated matters. Sam also worked closely with staff in other Divisions and Offices throughout the SEC on enforcement related issues, including playing a key role in the drafting of the rules establishing the SEC’s whistleblower program.

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