New York Federal Jury Finds Hedge Fund Manager Not Liable for Insider Trading Scheme (with Bondi Comment and Lofchie YouTube Selection)

A New York Federal Jury found a hedge fund manager at Wynnefield Capital Inc. ("Wynnefield") and two others not liable for an alleged $1.3 million insider trading scheme, marking the latest courtroom loss for the SEC.

The SEC had claimed that the hedge fund manager bought stock illegally in an industrial products supplier after hearing from another Wynnefield employee that the supplier was about to be acquired. The other employee allegedly had learned the information from a former analyst who worked on the merger at underwriter General Electric Capital.

Bondi Comment: This verdict is a reminder of the evidentiary hurdles faced by the SEC when it brings an enforcement action for insider trading. Unlike criminal prosecutors, who often have audio tapes from wiretaps, the SEC generally must rely on testimony, e-mails and trading records to prove its case. And while it has a lower burden of proof than do criminal prosecutors, the SEC still may be challenged to meet that burden based on the evidence.

See: SEC Litigation Release; Lofchie YouTube SelectionSee generally: Cabinet Insider Trading Materials (available to Cabinet subscribers only).