Did Rep. Christopher Collins (R-N.Y) commit the federal crime of securities fraud when he spoke to his son, Cameron, on the phone shortly after he found out bad news about an Australian biotechnology company that they both held shares in?
The answer may depend in part on which one of the 12 regional federal appellate circuits hear the appeal of the case. It may depend on which three appellate judges on such a circuit happen to be chosen to hear such an appeal. Even the same three appellate judges may significantly revise their view of the matter, applied to the same facts, over the course of less than a year, so the answer may depend in part on when Collins happens to catch the judges.
Such is the contemporary state of what passes for insider trading “law.” It’s enough to perplex even lawyers and law professors. “‘It’s Complicated’: The Evolving Case Law on How Relationships Impact Insider Trading Liability,” is how two lawyers at the firm Orrick headlined a blog post about the issue. A former federal prosecutor who is now a professor at Brooklyn Law School, Miriam Baer, last year published an article in the Yale Law Journal highlighting what she said was “the extent to which insider trading law falls short of criminal law’s legality principle.”
Baer explained that this “legality principle” includes “two distinct but related concepts. First, criminal prohibitions should be set forth with sufficient clarity to inform citizens in advance of what is prohibited; second, and of more importance in this context, crime creation is reserved solely for the legislature. Judges do not make crimes; legislatures do.”
A timeline of recent developments on this legal front is a reminder of just how complicated, evolving, unclear, and judge-written this area of the law is, writes Ira Stoll.
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