(Reuters) – The U.S. Justice Department asked the Supreme Court on Thursday to reverse a federal appellate court’s ruling that authorities said limited their ability to pursue insider trading cases.
Solicitor General Donald Verrilli filed a petition seeking review of a December ruling by the 2nd U.S. Circuit Court of Appeals in New York that had reversed the insider trading convictions of hedge fund managers Todd Newman and Anthony Chiasson.
That ruling had marked a major setback for an insider trading crackdown under way since 2009 under Manhattan U.S. Attorney Preet Bharara, whose office during that time brought charges against 96 people.
In the petition, Verrilli wrote that the appeals court decision will “hurt market participants, disadvantage scrupulous market analysts, and impair the government’s ability to protect the fairness and integrity of the securities markets.”
Lawyers for the defendants did not immediately respond to a request seeking comment.
In the Dec. 10 ruling, a three-judge panel held that prosecutors must prove that a trader knew a tip’s source received something in exchange.
That restriction made securing convictions against traders who heard the information from someone other the original tipper harder by requiring evidence about their knowledge of what benefit the source obtained.
Federal prosecutors and the U.S. Securities and Exchange Commission have said the decision threatened their ability to pursue insider trading.
The ruling reversed the 2012 convictions of Newman, a former Diamondback Capital Management portfolio manager, and Chiasson, co-founder of Level Global Investors, who were sentenced to 4 1/2 years and 6 1/2 years in prison, respectively, for engaging scheme involving tips about Dell Inc and Nvidia Corp.
The Supreme Court will decide whether or not to hear the case after it returns from its summer recess in October. (Reporting by Lawrence Hurley and Nate Raymond; Editing by Susan Heavey and Doina Chiacu)