Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
By Phyllis Diamond
Dec. 28 — There are material, disputed factual questions regarding whether Australian stock trader Trent Martin owed a duty of trust and confidence to Michael Dallas, the corporate lawyer who told him about IBM Corp.'s confidential plans to acquire SPSS Inc. in 2009, the U.S. District Court for the Southern District of New York said Dec. 28 (SEC v. Payton, S.D.N.Y., No. 14 Civ. 4644, 12/28/15).
It also isn't clear whether Martin received a personal benefit for tipping his roommate Thomas Conradt to the inside information—or that Conradt's downstream tippees Daryl Payton and Benjamin Durant knew the information was confidential and that Martin received a personal benefit for disclosing it—Judge Jed Rakoff said.
In September, Rakoff turned back a summary judgment motion by Payton and Durant to dismiss Securities and Exchange Commission insider trading allegations (177 SLD, 9/14/15). In this case, the court explained its reasons for the ruling.
Payton and Durant based their motion on the U.S. Court of Appeals for the Second Circuit's decision in United States v. Newman throwing out the insider trading convictions of two former hedge fund managers (238 SLD, 12/11/14). In that case, the appeals court said the prosecution didn't prove that the defendants—both downstream tippees—knew that an insider had disclosed confidential information in exchange for a personal benefit.
In the wake of the ruling, U.S. Attorney Preet Bharara asked the court to dismiss criminal insider charges against five men, including Payton and Durant, citing the inability to meet Newman's “novel evidentiary bar.” Payton and Durant then moved to dismiss the related SEC civil action (37 SLD, 2/25/15), but the court allowed the civil suit to proceed (67 SLD, 4/8/15). In the wake of that ruling, the defendants moved for summary judgment; in September, Rakoff denied their motion.
Explaining his decision, he said a jury must decide whether Martin breached a duty of trust and confidence to Dallas. “To be sure, there is competing evidence,” Rakoff wrote. “[A]ll this means is that the matter is genuinely disputed.
Summary judgment also isn't warranted on the question of whether Martin received a personal benefit for disclosing the information to Conradt. According to Rakoff, a reasonable jury could conclude that the defendants deliberately didn't ask about the circumstances in which Martin passed the information to Conradt “in order to remain technically ignorant of whether Conradt received a personal benefit, because they well understood that there was a high probability that just such a benefit had been provided.”
To contact the reporter on this story: Phyllis Diamond in Washington at email@example.com
To contact the editor responsible for this story: Susan Jenkins at sjenkins@@bna.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)