The SEC needs to prove that an individual traded
while in possession of what is called material non-public information meaning
a inside tip that was derived from a breach of fiduciary by another or the
SEC DC needs to prove that an individual lawfully came into possession of the
material non-public information. For example, a consultant to a company who
is given access to that information for work purposes but then misappropriates
it or misuses it to trade for personal benefit. It is a lot easier said and
defined than proven by the SEC. I investigated insider trading cases when
I was at the SEC. They are difficult to prove. As defense council, I insist that
the government prove its case or at least make a showing that it can prove
its case. clients that did not engage in insider trading,
I often advise to speak to the SEC truthfully and look them in the eye and
deny the allegations if that denial is true. In other situations, I will advise
my client to assert his fifth amendment right under the United States Constitution that permits him to remain
silent. The United States Supreme Court made clear that the Fifth Amendment is
designed not only to protect the guilty, but is also designed to protect the
innocent who have a reasonable fear of prosecution of becoming what the Supreme
Court said was ins snared and ambiguous circumstances.
It is under that reasoning that a client who is concerned that a statement may be
misinterpreted or may improperly be used against him can constitutionally and
lawfully remain silent. What’s the effect of that strategically? It requires the SEC to prove its case.
It does not allow the SEC to use my client’s words against him. Instead,
they need to independently establish by a prepoundonderance of evidence the elements necessary to prove their case.