How the Galleon verdict sheds light on overlooked SEC regulations

The guilty verdict for former hedge fund manager Raj Rajaratnam of 14 counts of conspiracy and securities fraud is consistent with the insider trading rules of the Securities and Exchange, which provide that a person is deemed to be trading "on the basis" of material non-public information if such person is aware of such information when making a trade.

According to Jamie L. Nash, partner at hedge fund law firm Kleinberg, Kaplan, Wolff & Cohen, P.C. in New York, an important proposition that this case may stand for is that “if you have material non-public information, you are not necessarily free and clear from insider trading liability just because you also have material public information that formed the basis for your trading decision. Anyone making trading decisions needs to be very mindful of this lesson any time they come into possession of non-public information."

Mr. Nash is available to discuss the SEC and other federal regulations at play in Mr. Rajaratnam's trial, and the future legal implications of this case on the hedge fund industry. [05/12/2011]