Non-Disclosure Agreements and Insider Trading: The Second Circuit Clarifies the Scope of Criminal Liability

May 12, 2021  |  New York Law Journal

The law of insider trading, while derived from Section 10(b) of the Securities Exchange Act of 1934, has largely been defined and shaped by federal court decisions. In this article, we discuss two recent Second Circuit decisions which further define the scope of liability for insider trading. In United States v. Chow and United States v. Kosinski, the Court held that breach of a contractual non-disclosure obligation is equivalent to a breach of fiduciary duty for purposes of insider trading liability. We consider how these decisions may reflect a tension with mail and wire fraud case law, which resists treating a contract breach as a basis for criminal liability.

Non-Disclosure Agreements and Insider Trading: The Second Circuit Clarifies the Scope of Criminal Liability (pdf | 181.14 KB)