The Second Circuit recently affirmed the insider trading conviction of Benjamin Chow, a corporate outsider who was found guilty of tipping off his former colleague about a potential acquisition of a US publicly traded company. The Second Circuit has once again addressed the issue of whether the breach of a duty of confidentiality created by a non-disclosure agreement can form the basis for insider trading liability. This is a cautionary tale for corporate outsiders of the potential liability that they could face.
Since the Supreme Court's decision in United States v Kelly, the scope of the decision's impact on federal white collar criminal prosecution has been an open question. The potential implications for insider trading prosecutions were made clear in United States v Blaszczak, with the Supreme Court vacating a US Court of Appeals for the Second Circuit decision that had affirmed four insider trading convictions. As these cases reflect, the scope of insider trading liability has been, and remains, in a state of flux.
When the United States began grappling with COVID-19 in March 2020, the US Securities and Exchange Commission (SEC) Division of Enforcement acted swiftly to make clear to market participants that it was ramping up its efforts to identify and prevent fraud in the wake of the pandemic. Approximately seven months later, statistics released by the SEC bear this out.
Individual prosecutions under the Foreign Corrupt Practices Act (FCPA) have markedly increased over the past five years. This increase in case law will help to better define local, regional and international enforcement. In addition, more FCPA case law shedding clarity on open issues will be a boon to lawyers, judges and scholars seeking to understand the contours of a complex statute – the elucidation of which has previously been almost the sole province of enforcers.