Alert July 06, 2010

Federal District Court Rules Against SEC in First Insider Trading Case Involving Credit Default Swaps

On June 25, 2010, the U.S. District Court for the Southern District of New York ruled in favor of a high yield bond salesman and a former portfolio manager for one of the bond salesman’s hedge fund clients, dismissing the first insider trading case brought by the SEC involving credit default swaps.  (SEC v. Rorech, No. 09-4329, 2010 U.S. Dist. LEXIS 63804 (S.D.N.Y. June 24, 2010).)  The Court’s decision provides important additional definition regarding how insider trading prohibitions apply to the high yield debt markets and credit default swaps and the SEC’s jurisdiction over the credit default swaps.  A Goodwin Procter Alert prepared by the firm’s White Collar Crime & Government Investigations Practice discusses the decision in greater detail.   

A litigation team of Goodwin Procter attorneys led by Richard M. Strassberg and Roberto M. Braceras represented the high yield bond salesman charged by the SEC in the case.