Antonia Apps, a lawyer for the government, argued prosecutors only need to establish that the recipients of insider information knew the tipper breached a duty to keep it confidential.However, she was met by a round of sharp questioning by the panel, including U.S. Circuit Judge Barrington Parker, who said the government’s “amorphous theory” gave little guidance to Wall Street firms on how they can legally use non-public information. “Your theory leaves all these institutions at the mercy of the government.”
The two former portfolio managers were found guilty in 2012 for their roles in a scheme the government said reaped $72 million in illicit profits after trading on inside information about Dell Inc and Nvidia Corp.
Prosecutors said both men traded on tips they received from analysts working at their hedge funds who were members of a “corrupt circle” of investment firm analysts that traded non-public information obtained from employees at various companies.
At trial, the did not require proof that they knew insiders at Dell and Nvidia received a benefit.
Lawyers for for the defendants argued the government is required to prove that tippees knew an insider received a personal benefit in exchange for non-public information.
This case is being watched by many during a time of significant prosecutions for insider trading. The results may have a major impact on what information can be used to make trades of stock.