JURY CHARGE OFFERS INSIGHT INTO MARK CUBAN’S INSIDER TRADING VICTORY

As our readers probably know, on October 16, 2013, a federal jury found Mark Cuban not guilty on allegations of insider trading in violation of § 17(a) of the Securities Act of 1933, § 10(b) of the Securities Exchange Act of 1934, and SEC Rule 10b-5.  Beyond the headlines, however, particular consideration should be given to the jury charge in this case.  An insider trading claim is often amorphous and difficult to prove.  See SEC v. Musella, 578 F. Supp. 425, 429 (S.D.N.Y. 1984).  The claim requires, in part, proof that the defendant received material, nonpublic information.  Court records from Cuban’s trial reveal that the jury struggled with the definition of nonpublic and asked the judge if there was a level of detail necessary for information to be considered public information.  The judge referred the jury back to the jury charge, which stressed that the key inquiry for whether information is nonpublic is whether the information is “available.”  The charge described, among other details, that “the fact that information has not appeared in a newspaper or other widely available public medium does not alone determine whether the information is ‘nonpublic’.” and explained that information made available to analysts, investors, and the press would be public information.  The full jury charge is available here.  Ultimately, the jury found that the SEC did not prove by preponderance of the evidence that Cuban received material, nonpublic information.  Accordingly, when litigating insider trading cases, the jury charge in SEC v. Cuban may provide a useful example of court-approved definitions and instructions for difficult and amorphous insider trading concepts.