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Trading Woes End in Huge Victory for SEC

A jury in New York found two brokers liable, Daryl Payton ("Payton") and Benjamin Durant ("Durant"), for insider trading on Monday February 29, 2016. The jury found that Payton and Durant had improperly purchased shares of SPSS, Inc. ("SPSS") based on confidential tips about the acquisition of SPSS by IBM Corp. ("IBM"). The two brokers made a significant profit on the trade, but could not hide from the watchful eye of the U.S Securities and Exchange Commission (the "SEC"). The verdict was a huge victory for the SEC, given that a 2014 decision in the Second Circuit made it much harder for the government to win insider trading cases when the subject of the suit was more than one layer from the original source of the tip. Moreover, under the new standard, the government must now demonstrate that the source received a benefit and/or reward beyond mere friendship.

The SEC painted a credible and lucid picture for the jury to establish how the privileged information reached Payton and Durant. Michael Dallas ("Dallas") was part of a New York law firm's merger and acquisition group tasked to work on IBM's acquisition of SPSS. Since the acquisition was protected by various confidentiality and non-disclosure agreements, Dallas was aware that any related information was privileged, non-public, and sensitive. Despite this knowledge, Dallas shared details about IBM's acquisition with his friend, Trent Martin ("Martin"). While Dallas expected Martin to keep the information to himself, Martin purchased SPSS stock and told his roommate, Thomas Conradt ("Conradt"), a Euro Pacific employee, about the acquisition. Subsequently, Conradt told his Euro Pacific colleagues, including Payton and Duran, who traded on the tip prior to the information regarding the acquisition was made public.

The SEC Division of Enforcement Director, Andrew Ceresney, claimed victory for his agency and the public, stating "today's jury verdict holding [Payton and Durant] liable for insider trading reaffirms our commitment to aggressively root out and prosecute insider trading schemes, including by taking defendants to trial, in order to protect the integrity of our markets." The SEC's message is clear: it has a watchful eye on the market, and it will do everything in its power to maintain trust in the market.

The legal team at SFMS has significant experience litigating securities matters. If you have any questions regarding this subject or this posting, please contact Alec Berin (aberin@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

Sources:

http://www.law360.com/securities/articles/764293?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

Case No.: 1:14-cv-04644, Amended Complaint (Document 32)

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