There has long been disagreement within the SEC and by legal scholars about whether the agency has the authority to pursue these types of charges, said John Reed Stark, who worked for the SEC’s enforcement division for nearly 20 years and founded its former Office of Internet Enforcement. The defendants could argue that they are not company executives who had a duty not to trade on confidential corporate information and therefore are outside of the SEC’s jurisdiction, he said. This is a case of “outsider” trading rather than insider trading, said Stark, who now teaches cybersecurity law at Duke University.
“These cases are not only challenging forensically but legally as well,” Stark said. “The SEC must have felt an extraordinary amount of pressure to bring this case. They are getting aggressive, and I think they are spot-on.”
