First-Ever Derivatives Insider Trading Case Decided

Marketing High Yield Bond Offerings and SEC's Authority Over Credit Default Swaps at Issue

On June 25, 2010, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York issued  a 122-page opinion clearing defendants Jon-Paul Rorech, a high yield bond salesman from Deutsche Bank, and Renato Negrin, a former portfolio manager for Millennium Partners L.P. and one of Mr. Rorech's hedge fund clients, of all wrongdoing in the first-ever insider trading case involving credit default swaps ("CDSs").

The Rorech decision provided much-needed clarity for hedge funds and other market professionals who trade credit default swaps or high yield bonds.  The court's opinion was the first one to address the jurisdiction of the SEC over credit default swaps and the manner in which high yield bond deals are marketed and sold throughout the fixed income market.  It has been the subject of extensive media coverage in the financial press.