Trading Client Trust: A Glimpse Into Insider Trading Within the Legal Profession

May 7, 2018

New York State Bar Association Journal

By: Devika Kewalramani, Jason Canales, and Amanda Kane

Have you seen these recent headlines? They highlight a disconcerting increase in the number of insider trading charges against lawyers. The irony is that trust and confidentiality are the pillars on which a client-lawyer relationship stands. Insider trading allegations against a lawyer have the effect of ripping away at the very core of that relationship. The legal profession is regulated by rules of professional conduct that set high ethical and professional standards for lawyers. Moreover, lawyers and law firms are bound by their duty of confidentiality owed to clients. This requirement to protect client information is not a new obligation. So, how can this happen? Could it be because sensitive client information is more readily available at law firms via electronic means such that improper access and use may go undetected or unreported? Whatever the possible causes may be for the proliferation of insider trading activities by lawyers, it seems that there may be a much darker problem facing the legal profession that may need to be looked at and addressed.

Part I of this article will examine recent cases involving insider trading committed by lawyers, their friends and family, non-legal staff and hackers. Part II will highlight the ethical issues that surround the alleged misconduct. Part III aims to lay out some practical tips and guidelines to aid lawyers and law firms on how to keep insider trading issues outside the firm.

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