The Catholic University of America

Securities Law Lecture   

CUA’s Securities Law Program Presents the First Installment in its Fall Lecture Series

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Pictured above from L to R: Daniel Gallagher, Bill McLucas, Andrew Ceresney, David Lipton

On Wednesday evening, September 9, 2015, three of the best known luminaries in the Securities Law environment, converged on Slowinski Courtroom to present, debate, and ultimately propose changes to the ever vexing issue of the law of “Insider Trading.”

The three speakers bridged a significant legal time span, but each played and play a meaningful role in the development of this captivating area of law. The speakers were: Bill McLucas, chair of WilmerHale’s Securities Law Department and the longest serving Director of Enforcement at the Commission; Andrew Ceresney, current Director of Enforcement at the United States Securities and Exchange Commission (SEC), former partner of Debevoise & Plimpton, and former Deputy Chief Appellate Attorney of the United States Attorney’s Office for the Southern District of New York; and, moderated by CUA Alumnus Dan Gallagher, ’99, current Commissioner at the SEC, former partner at WilmerHale, former counsel to SEC Chairman Christopher Cox, and former acting Director of the Division of Trading and Markets.

As noted by the Securities Program Director, Professor David Lipton, in his introduction, the law of insider trading is an “odd duck.” In fact, there is not really a “statute” covering insider trading. Rather, the legal prohibition has developed from case law.

Bill McLucas explained how the development of the concept of breach of fiduciary duty was critical to the judicial creation of a prohibition on insider trading: in the classical case of the trading insider, the case of the trading “outsider” who has “misappropriated” insider information, and the trading “tippee” who has gained inside information from a “tipper.” Director of Enforcement, Andrew Ceresney, then explained how a recent decision of the Second Circuit has created doubts as to how courts should interpret what constitutes a “breach of fiduciary duty”. That case, U.S. v. Newman, is currently being appealed to the Supreme Court.

It was at this point in the evening, when the heavy discussion began. All three participants debated why Congress has not stepped in to develop a universal law dealing with insider trading and whether it would be wise to do so now. Commissioner Gallagher suggested that such an absolute law might hinder the innovation of information exploration in the markets. Gallagher proposed that it might be far better to continue the prohibition through the means of case law which can delve more meaningfully into the integrity of the methodology used to gather information. All three participants seem to agree that there are “honest” and not so honest ways to gather useful market information.

When asked to summarize the contribution of the evening’s presentation to the CUA Law community and the development of insider trading law, Prof. Lipton said “What an evening. This really was a remarkable opportunity for our students and alumni to be a part of an extraordinary analysis of the state of insider trading.”

Upcoming Securities Law Program Lecture Series dates include:

October 14, 2015, 5 p.m.

How Shareholder Activism
is Altering the Nature of Corporate Governance

Speaker: David Katz
Partner, Wachtell, Lipton, Rosen & Katz

November 4, 2015, 5 p.m.

Should Corporate General Counsels
Be Responsible for Compliance Failures

Dick Walker, General Counsel to
Deutsche Bank and former General Counsel
and Director of Enforcement of the SEC

Rick Ketchum, CEO, FINRA