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Insider Trading and Conscious Avoidance: Handling the Government’s Most Powerful Prosecutorial Tool.
Author: Benjamin Fischer
Since 2009, the conscious avoidance theory has become a tool of the United States government in the fight against insider trading.
Established in US V. Bourke, the prosecution created the argument that actual knowledge of insider trading can be established through the presentation of circumstantial evidence. The evidence suggested that the defendant should have known or “consciously avoided” knowing that there was a high possibility of corruption based on a number of factors. Recently, the conscious avoidance theory was on display in the conviction of Michael Steinberg, a former senior trader at SAC. The government argued that Mr. Steinberg “knew” that the obtained information was inside information because he “consciously avoided” due diligence on determining the source of his information. In this article, Mr. Fischer outlines potential options for future defendants to side step or alleviate some of the advantages the government’s prosecutorial team has with the “conscious avoidance” standard.
What do you think about the future implications the “conscious avoidance” standard has on insider trading cases? What is the best set of options for future defendants in mounting a successful defense against government allegations of insider trading?