2nd Circuit refuses to reconsider ruling that dealt blow to insider trading prosecutions

Markets Associated Press

A federal appeals court refused Friday to reconsider a ruling that dealt a blow to U.S. Attorney Preet Bharara and the prosecution of insider trading on Wall Street.

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The 2nd U.S. Circuit Court of Appeals issued a one-paragraph ruling turning down a petition from Bharara's office. It said neither the three-judge panel that made the ruling in December nor the entire court would rehear the case.

The original ruling in December reversed two convictions and appeared to narrow the definition of insider trading. It said the defendants involved — portfolio managers Anthony Chiasson of New York and Todd Newman of Needham, Massachusetts — were too far removed from the source of inside information to be prosecuted.

The court said the government's flurry of prosecutions, which produced more than 80 convictions since 2008, was "increasingly targeted at remote tippees many levels removed from corporate insiders." Prior cases generally involved defendants directly participating in the passing of secrets, the court said.

At the time, Bharara issued a statement saying the ruling "interprets the securities laws in a way that will limit the ability to prosecute people who trade on leaked inside information." His office made the same argument in its petition.

The court's ruling Friday did not say why it turned down the petition.

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Bharara's office said it had no new comment on the ruling or on whether he would appeal it to the U.S. Supreme Court.

Chiasson, who co-founded Greenwich, Connecticut-based Level Global Investors, had been sentenced to 6 1/2 years in prison. Newman, who worked for Diamondback Capital Management, was sentenced to 4 1/2 years.