Nov 18, 2013
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Shearman & Sterling Litigation partner John Nathanson, counsel Christopher LaVigne and associate Jason Swergold wrote a Bloomberg BNA article titled “Strange Bedfellows: Insider Trading and Political Intelligence.” The article discusses the inherent difficulties in prosecuting insider trading cases based on “political intelligence,” and whether trading on political intelligence actually constitutes insider trading.
The authors focus on three main challenges to prosecuting potential insider trading cases. First, depending on the type of case that is brought, prosecutors and regulators will face challenges in establishing that the information at issue was non-public. Second, prosecutors and regulators will need to show that particular political intelligence is material. Third, even if the political intelligence is material and nonpublic, cases against tippers and tippees will require proof that the tipper breached his duty of trust or confidence. The authors also note that, while this creates difficulties for regulators, it also poses challenges for investors who “are left with little guidance on how to distinguish between lawful and unlawful information when it comes to political intelligence.”