The Supreme Court stated clearly in Chiarella v. United States that the mere fact that a person receives material nonpublic information and then executes a trade based on that information does not constitute a crime. But judicial intervention has not stopped the government from trying to come up with novel theories by which to prosecute so-called "remote tippees" – recipients of information several steps removed from the corporate insiders at the beginning of the chain – for insider trading.
This article discusses the government's unsuccessful trial and prosecution of client Steven E. Slawson and the wire and securities fraud statutes upon which it was based, analyzing the ramifications of the case for hedge fund managers.
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