Scalia & Thomas Look to Take on SEC’s Insider-Trading Theory

Burr & Forman
Contact

In an unusual three-page concurrence to a November 10 cert denial, Justice Scalia (joined by Justice Thomas) virtually called for a case that would subject the SEC’s insider-trading interpretations to scrutiny. Because courts owe no deference to a prosecutor’s interpretation of a criminal law, asked Scalia, then why should they owe Chevron deference to an executive agency’s interpretation of a law [like ’34 Act § 10(b)] that’s enforced both criminally and administratively? Scalia also criticized deferring to the SEC’s expansive insider-trading theory in the case as turning “normal [statutory] construction … upside-down, replacing the doctrine of lenity with a doctrine of severity.” The case presented a “poor setting in which to reach the question,” so Scalia concurred in the cert denial, noting that when the right one comes along, “I will be receptive to granting it.” Whitman v. United States, 574 U.S. ___ (2014)(No. 14-29, Nov. 10, 2014), here (the briefing is here).

This “call for a case” comes as the Second Circuit is poised to decide whether a downstream tippee must have knowledge of the tipper’s personal benefit (giving rise to the breach of duty) or merely that the information once had been confidential. That issue was argued last April and remains under consideration in the consolidated cases, United States v. Newman, No. 13-1837 (2nd Cir.) and United States v. Chiasson, No. 13-1917 (2nd Cir.). During oral argument, the appellate panel reportedly was hostile to the government’s theory that a tippee need not know of that a tipper received a personal benefit from the disclosure of confidential information. See, e.g., SEC v. Obus, 693 F. 3d 276, 289 (2nd Cir. 2012)(seeming to suggest tippee need not know of tipper’s benefit).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© Burr & Forman

Written by:

Burr & Forman
Contact
more
less

PUBLISH YOUR CONTENT ON JD SUPRA NOW

  • Increased visibility
  • Actionable analytics
  • Ongoing guidance

Burr & Forman on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide