Second Circuit Holds That Primary Securities Fraud Violations Require Deception Attributable To The Defendant

Originally published July 24, 2008

Keywords: deception, New York Stock Exchange, appeal, United States v. Finnerty, federal securities, criminal, Second Circuit, securities, fraud, NYSE Rules, stock market, fraud-on-the-market doctrine, Department of Justice, Securities Act

In a recent decision addressing the meaning of deception under the federal securities laws, the US Court of Appeals for the Second Circuit affirmed the acquittal of David Finnerty, a former specialist on the floor of the New York Stock Exchange who had been charged with criminal securities fraud (United States v. Finnerty). The Second Circuit held that the district court properly set aside the jury's verdict finding Mr. Finnerty guilty, because the government failed to prove that Mr. Finnerty's conduct constituted deception, a necessary element under the federal securities fraud statute.