When an attorney is accused of insider trading, the stakes could not be higher. The
government does not treat these cases as regulatory slip-ups. Prosecutors in the
Southern and Eastern Districts of New York pursue them as serious federal crimes —
with sentences that dwarf most other white collar offenses — and they have the
investigative tools, the wiretap authority, and the forensic resources to match. If you are
a lawyer, financial professional, or anyone who has been contacted by the SEC, DOJ, or
FBI regarding your trading activity, you need a criminal lawyer in New York with
federal white collar experience before you say another word.
What the Government Must Prove
Insider trading charges against attorneys are built on two interlocking legal theories,
each grounded in Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C.
§ 78j(b)) and Rule 10b-5 (17 C.F.R. § 240.10b-5).
The Classical Theory
A corporate insider — officer, director, or employee — who trades on material non-
public information (MNPI) breaches a fiduciary duty owed to the company’s
shareholders. Lawyers who sit on boards, serve as general counsel, or advise companies
directly on transactions fall squarely within this theory.
The Misappropriation Theory
This is the theory that most often ensnares outside counsel. Recognized by the Supreme
Court in United States v. O’Hagan, 521 U.S. 642 (1997), it holds that an outsider who
misappropriates confidential information from a source to which they owe a duty of
loyalty — such as a client — and uses it to trade in securities is liable under Rule 10b-5.
The attorney-client relationship is the duty. The confidential deal information is the
MNPI. The trade is the crime.
Critically, the government does not need to prove you knew trading on the information
was illegal. It only needs to show you knew the information was confidential and used it
for personal gain. That is an extraordinarily low threshold — and one that has caught
many professionals who believed their conduct existed in a gray area.
The Charges — and What They Carry
Insider trading prosecutions rarely come as a single count. Federal prosecutors stack charges to maximize sentencing exposure:
- Securities fraud under 18 U.S.C. § 1348 (Sarbanes-Oxley): up to 25 years
per count - Wire fraud under 18 U.S.C. § 1343: up to 20 years per count — and every
email, text, or trade confirmation can be a separate count - Obstruction of justice under 18 U.S.C. § 1519: up to 20 years — triggered
the moment a document is altered or deleted after an investigation begins - Civil penalties under 15 U.S.C. § 78u-1: treble damages of up to three
times the profit gained or loss avoided, running parallel to any criminal case
The SEC and DOJ coordinate closely. A civil Wells Notice from the SEC frequently
precedes — or runs alongside — a criminal grand jury investigation. By the time federal
agents knock on your door, the government has often been building its case for months.
Why Attorneys Face Unique Exposure
The same duty that defines the profession becomes the government’s weapon. Under
New York Rules of Professional Conduct Rule 1.6, a lawyer owes a duty of confidentiality to every client. Under the misappropriation theory, that duty is the legal hook. There is no argument that the information was freely obtained — the government simply points to the engagement letter and the trade. Tipping is equally dangerous. An attorney who passes MNPI to a spouse, a friend, or a financial advisor can face the same charges as if they had traded themselves — under the personal benefit analysis established in Dirks v. SEC, 463 U.S. 646 (1983), as refined by Salman v. United States, 580 U.S. 106tipper liability can be as intangible as a gift to a close friend or family member.
Additionally, the SEC’s Division of Enforcement now uses sophisticated data analytics to
cross-reference law firm representation timelines with options and equity trading
activity. If your firm was engaged on a deal and trading occurred in the target’s
securities before announcement, the SEC will flag it. A New York criminal lawyer
experienced in securities matters can help you understand your exposure before a
formal investigation begins.
Bar Discipline Runs Concurrently — and Automatically
An indictment alone can trigger interim suspension proceedings before the Attorney
Grievance Committee under Judiciary Law § 90 and the Rules of the Appellate
Division. A felony conviction results in automatic disbarment under Judiciary
Law § 90(4)(a) — no separate proceeding required.
These tracks run simultaneously. Statements made in bar proceedings can find their
way into criminal court, and vice versa. A Brooklyn white collar lawyer or
Manhattan defense lawyer who handles both criminal defense and professional
responsibility matters is not a luxury — it is a necessity.
Available Defenses
A strong defense begins the moment counsel is retained — not at trial. Depending on the
facts, the following defenses may apply:
The Information Was Not Material or Not Non-Public
The government must prove the information would have been significant to a reasonable investor and was genuinely non-public at the time of the trade. Trading decisions based on independent research, publicly available analyst reports, or themosaic theory — piecing together non-material public facts — do not constitute insider trading.
No Breach of Duty — and No Personal Benefit
Under Dirks v. SEC and Salman v. United States, tippee liability requires a tipper who
breached a duty and received a personal benefit in doing so. Challenging whether a duty
existed, whether it was breached, or whether any benefit passed is often the most
effective path to dismissal.
Lack of Criminal Intent
The government must prove the defendant acted willfully. Contemporaneous records of
independent research, trading history consistent with a prior strategy, and the absence
of any communication linking the trade to the confidential information can all negate
intent.
Pre-Arranged Rule 10b5-1 Trading Plans
Trades made pursuant to a properly established Rule 10b5-1 plan — adopted before the
defendant possessed MNPI — provide an affirmative defense. Timing, documentation,
and the absence of plan modifications after receipt of MNPI are critical to its viability.
Fourth Amendment — Suppression of Wiretap Evidence
Federal insider trading investigations routinely involve court-authorized wiretaps under
18 U.S.C. § 2518 (Title III). Defects in the warrant application, failures to satisfy
statutory necessity requirements, or unlawful expansion of surveillance scope can result
in suppression of recordings that constitute the government’s most damaging evidence.
If You Are Under Investigation: What to Do Right Now
The government will have spent months building its case before you are contacted. The
decisions you make in the first 24 to 48 hours matter enormously. If you need an
attorney in New York, do not delay.
Stop immediately:
- Do not speak to investigators, federal agents, or SEC staff without counsel
present — anything you say can and will be used against you - Do not delete, alter, or destroy any documents, emails, texts, or trading records —
this is obstruction under 18 U.S.C. § 1519 and carries up to 20 years - Do not discuss the investigation with colleagues, assistants, or anyone other than
your defense attorney - Do not assume voluntary cooperation will produce leniency — not without a
formal proffer agreement negotiated by counsel
Act immediately:
- Retain a criminal defense attorney with demonstrated SDNY and EDNY
white collar experience - Preserve all documents and trading records — your counsel will advise on the
scope of preservation obligations - Assert your Fifth Amendment right to remain silent — it applies from the very
first contact with investigators - If you have received a Wells Notice from the SEC, respond only through counsel
— the Wells response is a critical strategic document that can influence whether
charges are filed
Why You Need an Experienced New York White Collar
Defense Attorney
The SDNY and EDNY securities fraud units are among the most sophisticated
prosecutorial offices in the world. They are staffed by former SEC lawyers, forensic
accountants, and agents who have spent years working these cases. They will have
trading records, wire transfer analysis, communications metadata, and potentially
recordings before you are ever aware of the investigation.
A Manhattan defense lawyer or Brooklyn white collar lawyer with federal court
experience knows the prosecutors, the judges, and the procedural landscape of these
courts. Effective representation in white collar cases means intervening early — before
indictment, before a grand jury vote, and often before charges are formally considered —
to present exculpatory facts, challenge the government’s evidence, and negotiate from a
position of strength.
Whether you received a subpoena, a Wells Notice, a call from federal agents, or simply
learned that a colleague has been approached, now is the time to act. A criminal
defense attorney retained at the earliest stage has the greatest opportunity to
influence the outcome.
Contact a New York Criminal Defense Attorney Today
Our firm represents lawyers, financial professionals, and executives facing federal
insider trading and securities fraud investigations throughout New York — including the
SDNY, EDNY, and state courts across Manhattan, Brooklyn, Queens, the Bronx, Staten
Island, Westchester, and Long Island. Consultations are strictly confidential.
If you need an attorney in New York, call now. The earlier counsel is in place, the
more your defense can be shaped — before the government’s narrative hardens into an
indictment.