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September 15, 2015
Commentary by Steven Lofchie

An administrative law judge dismissed an insider trading case brought by the SEC against a trader at an investment bank. The case examined the personal benefit prong of the "misappropriation theory". The inside information was provided by a research analyst at the bank and concerned an imminent change in the rating of a security. Administrative Law Judge Jason S. Patil concluded that the SEC Division of Enforcement failed to meet its burden of proof in attempting to show that the insider tip was offered in exchange for a personal benefit and that, given the absence of proof of personal benefit