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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: doctoratomic who wrote (92450)	9/9/2005 1:13:11 PM
From: Jeffrey S. Mitchell	Read Replies (1) \| Respond to of 122087

...we all live under the same laws, judges and government True, but what should also be noted is that various Circuits have different interpretations of the same law. The Second Circuit has a much broader interpretation of the SEC regulations they nailed Elgindy on. So had he been tried in San Diego, his home town, which is under Ninth Circuit jurisdiction, it would likely have been a whole different ball game. - Jeff ----- 42 AMCRLR 877 American Criminal Law Review SECURITIES FRAUD Use Versus Knowing Possession of Inside Information Considerable disagreement developed in the courts about whether possession of material, non-public information was enough for Rule 10b-5 liability or whether a defendant's use of that information had to be demonstrated. The Second Circuit adopted the "knowing possession" standard in United States v. Teicher. The knowing possession standard is based on the idea that it is difficult for a person to possess material, non-public information and purchase or sell a security without using that information. Both the Ninth Circuit, in United States v. Smith, and the Eleventh Circuit, in Securities Exchange Commissioner v. Adler, endorsed the "use" test, instead of the "knowing possession" standard, for insider trading liability under Rule 10b-5. Under the "use test," the SEC must prove that the insider used the inside information when he traded, and not merely that the insider traded while in possession of inside information. The government bears the burden of proving that the defendant actually used the inside information in the transaction. The inside information need not be the sole cause of the trade, but only a "'significant factor' in the insider's decision to buy or sell." In 2000, the SEC responded to Smith and Adler by adopting Rule 10b5-1, which states that a purchase or sale of a security is "on the basis of" material, non-public information when the person making the purchase or sale is aware of the material, non-public information. The Rule provides an affirmative defense in certain situations where a person who possesses material, non-public information enters into a transaction under a contract that preexisted the possession of the information. This affirmative defense contains a good faith element, which requires that the contract not have been entered into for the purpose of evading the Rule. goliath.ecnext.com -----