INSIDER-TRADING prosecutions usually revolve around whether information is illegally obtained and then, knowingly and profitability, traded on. On July 19th America’s Securities and Exchange Commission (SEC) used a novel approach to charge Steven Cohen, boss of SAC Capital, one of world’s most successful hedge funds. The agency asserts he should have known that two of his employees had illegally obtained information (which turned out to be worth $275m, through trading profits and avoided losses) and then failed to supervise them sufficiently to discourage violations of the law. Whether this argument flies in court is an open question. The SEC’s move suggests that, after an extensive investigation, it had not collected strong enough evidence to directly accuse Mr Cohen of insider trading and chose to opt for an alternative charge rather than drop the case. More on The Economist here.
