Enforcement Pipeline: Insider Trading And Hedging Pipes

Article by Bruce Hiler, Tom Kuczajda, And Anne Marie Helm*

Recently, the Staff of the SEC’s Division of Enforcement has indicated a reinvigorated interest in and focus on insider trading and hedge fund activities.¹ One particular scenario that the Division of Enforcement has aggressively policed over the past few years, and where it apparently continues to concentrate, is trading of securities – often by hedge funds – in connection with Private Investments in Public Equity ("PIPE offerings").² The theories and arguments put forth by the SEC in pursuing insider trading claims against investors in PIPEs who have employed shorting strategies in anticipation of participating in a PIPE are instructive as cautionary tales.³