On April 3, the US Court of Appeals for the Second Circuit denied the request of Preet Bharara, US Attorney for the Southern District of New York, for an en banc hearing after the court issued a ruling in December that drastically limited the scope of insider trading prosecutions. With the original ruling in United States v. Newman left in place, prosecutors will be required to prove beyond a reasonable doubt that the tippee had knowledge of the personal benefit received by the tipper who initially conveyed the insider information.

In requesting the en banc hearing, Bharara had argued that the original decision’s “erroneous definition of the personal benefit requirement will dramatically limit the government’s ability to prosecute some of the most common culpable and market-threatening forms of insider trading.”

While a possible appeal to the US Supreme Court may be forthcoming, a spokesman for Bharara declined to comment on the matter. Given certain statements by Justices Scalia and Thomas attacking the deference given to the Securities and Exchange Commission when denying certiorari in Whitman v. United States, 574 U.S. ___, 135 S. Ct. 352, 353 (2014), it seems unlikely the US Solicitor General would want to approve such an appeal. Members of Congress are also attempting to forward legislation that lends clarity to the issue. Even prior to the Second Circuit’s refusal to rehear Newman, Connecticut Congressman Jim Himes introduced the bipartisan Insider Trading Prohibition Act, which seeks to explicitly ban insider trading while also clarifying the knowledge requirement and derivative liabilities. Citing the Second Circuit’s Newman decision, Representative Himes said in a press release, “The development of the law over time on a case-by-case basis has resulted in legal standards that have become ambiguous and problematic.”

U.S. v. Newman, No. 13-1837(L) (2d Cir. Apr. 3, 2015)