The Securities and Exchange Commission recently lost its first battle to enforce insider-trading laws over the vast business of credit default swaps, but compliance departments should take note: The agency still won the right to police such trading generally.
The SEC saw its case—one of the first filed under its new system of specialized, fast-acting enforcement teams—dismissed in federal district court when the judge determined that no insider trading actually occurred between the two defendants in question. But, crucially, the judge did rule that trading in credit default swaps is governed by Section 10(b) of the Securities Exchange Act, and that the SEC can at least try to bring insider-trading cases involving credit default swaps if it chooses.
