Seward & Kissel is mentioned in a Law360 article titled, “Sears Investor’s Short-Swing Trading Suit Put To Rest.”

March 28, 2019

Seward & Kissel is mentioned in a Law360 article titled, “Sears Investor’s Short-Swing Trading Suit Put To Rest.”

Mark Hyland and Noah Czarny successfully represented several managed account owners of a registered investment advisor (“RIA”), obtaining a dismissal with prejudice in a Southern District of New York action (Rubenstein v. Berkowitz, 2019 U.S. Dist. LEXIS 51966 (S.D.N.Y. March 27, 2019)) that alleged insider trading under Section 16(b) of the Securities and Exchange Act of 1934.

Section 16(b) requires “insiders” of an issuer to disgorge any profits they make from buying and selling the issuer’s securities in a six-month window.  Insiders can include those who are at least 10 percent beneficial owners of an issuer’s securities, and two or more people can be insiders when they agree to pool their securities such that they collectively own 10 percent of the issuer’s securities together as a Section 13(d) shareholder “group.”

In Rubenstein v. Berkowitz, the plaintiff argued that the managed account owners were insider of Sears by virtue of forming a group with their RIA. The Court rejected this, holding that the plaintiff failed to plausibly allege that the managed account owners were insiders for purposes of Section 16(b) because: (1) delegating general and open-ended investment authority to an RIA is not, by itself, sufficient to establish an agreement to form a group with respect to a specific issuer, and (2) an agreement to form a group cannot not be premised merely on inaction or “silent acquiesce.”


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