Securities; Insider trading; summary judgment

Listen to this article

Securities; Insider trading; summary judgment

In an insider trading prosecution, it was error for the district court to grant summary judgment to the SEC on the issue of scienter.

“[W]e do not perceive how it is possible to grant summary judgment on scienter given the nature of the October 13, 2000 NAV decline. The losses that Bauer is charged with unlawfully avoiding stem from a completely unorthodox shift in the manner in which the pricing committee set the NAV. The district court found that Bauer “did not participate in devising the haircut, nor vote on its use,” and there is no evidence that she possessed specific information regarding impending across-the-board devaluations at the time she redeemed her shares. Further, the Short Duration Fund’s NAV is a derivative valuation of a portfolio of municipal bonds that are notoriously difficult to price. The NAV at which Bauer redeemed was based on valuations furnished by an independent pricing agency that, nine days after her redemption, the Pricing Committee still could not definitively override. To take the scienter determination away from a jury under these circumstances was, we think, improper.”

Reversed and Remanded.

12-2860 SEC v. Bauer

Appeal from the United States District Court for the Eastern District of Wisconsin, Clevert, J., Zagel, J.

Full Text