Federal jury says stockbrokers committed insider trading on IBM deal

A federal jury found two former New York stockbrokers liable for trading on confidential tips about an IBM Corp acquisition. This decision was rendered despite an appeals court ruling that has made insider trading cases more difficult to prove. The jury said that Euro Pacific Capital Inc brokers Daryl Payton and Benjamin Durant liable for engaging in insider trading.

After a 2014 appellate ruling attacking insider trading laws, prosecutors dropped criminal charges against Payton, Durant and three others but theΠSEC continued to pursue civil charges. The SEC alleged that the two men placed trades before IBM announced its $1.2 billion acquisition of SPSS Inc in 2009.

Payton, 39, and Durant, 40, admitted they traded on non-public information but said their trades did not constitute illegal insider trading, a position they adopted after the appellate ruling.

The U.S. Supreme Court is scheduled to review an insider trading case in coming months to clarify the law.

The federal appeals court in New York held that traders could be held liable only if they knew a tip’s source received a benefit of “some consequence,” not just friendship, in exchange.

According to the SEC, in 2009, Michael Dallas, an attorney at IBM’s law firm, told his friend Trent Martin that he was working on IBM’s acquisition of SPSS.

The case is Securities and Exchange Commission v. Payton et al, U.S. District Court, Southern District of New York, No. 14-04644.

Jeffrey Newman represents whistleblowers.