Federal Court Dismisses SEC Insider Trading Case

In U.S. Securities and Exchange Commission v. Christopher Clark, et al., the U.S. District Court for the Eastern District of Virginia dismissed an SEC insider trading case as a matter of law. By granting the defendant's motion for judgment as a matter of law, the case was resolved before any defense was offered by the defendant, who was the alleged tippee.

The SEC's Complaint alleged that one defendant bought "out-of-the-money" call options based on material nonpublic information provided by the other defendant, the company's corporate controller who reportedly did not trade. The alleged tipper settled before trial without admitting or denying any allegations in the Complaint. The SEC's insider trading claim relied on inferences drawn from the existence of conversations between the defendants, who are brothers-in-law, coinciding with option purchases as a company merger closing approached. The SEC also emphasized inferences drawn from changes in trading patterns after the alleged exchange of material nonpublic information, noting that the defendant had never taken a bullish position on the company before the alleged communications.