Sec. & Exch. Comm’n v. Bauer

Bauer served as an officer in investment companies, on the pricing committee, and as chief compliance officer, implementing policies to prohibit employees from trading on nonpublic information regarding the securities held in the companies’ portfolios. Following trades for her personal account, the Securities and Exchange Commission charge Bauer with insider trading in connection with mutual fund redemption. The district court granted the SEC summary judgment. The Seventh Circuit reversed, noting that the SEC rarely brings insider trading claims in connection with mutual fund redemption and that no federal court has ruled on the issue. The district court must determine whether Bauer’s alleged conduct properly fits under the misappropriation theory of insider trading, under which a corporate outsider misappropriates confidential information for securities trading purposes in breach of a duty owed to the source of the information. The court noted that Bauer did not argue that mutual fund redemptions cannot entail deception under the classical theory, but conceded that insider trading liability could attach to mutual fund redemptions if it could be shown that she knew the product was priced incorrectly, but that the issue must be resolved at the trial court level. View "Sec. & Exch. Comm'n v. Bauer" on Justia Law