[In SEC v. Rosenthal et al., 2011 WL 2247585 (2d Cir. June 9, 2011),] the court ruled that the SEC may not obtain civil money penalties when insider trading results in no monetary gain (profit or loss avoided) to the defendants. In other words, traders who trade on inside information, but do not obtain a monetary benefit, are not subject to penalties.
The defendants were convicted on insider trading charges and the SEC brought a follow-on civil case in 2007. They traded on tips from an auditor about a proposed corporate acquisition. The acquisition did not occur and as a result the trades resulting from the tip did not result in a profit or the avoidance of losses.
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