United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge.
After a six-day trial, a jury found in favor of defendant Siming Yang on the SEC's claim of insider trading but in favor of the SEC against Yang on its claims of "front running" and filing false Schedule 13D forms with the SEC. The Court later denied Yang's motion for judgment as a matter of law or a new trial on the latter claims. In this order, the Court determines the appropriate remedies and the nature of the appropriate final judgment. This order assumes familiarity with the background of the case. See SEC v. Yang, No. 12 C 2473, 2014 WL 1303457 (N.D. Ill. Mar. 30, 2014) (decision denying Yang's post-trial motions); SEC v. Yang, ___ F.Supp.2d ___, 2013 WL 6049074 (N.D. Ill. Nov. 14, 2013) (decision denying Yang's motion for summary judgment).
1. Permanent injunction
A permanent injunction is appropriate if the SEC shows a reasonable likelihood of future violations by the defendant. See SEC v. Holschuh, 694 F.2d 130, 144 (7th Cir. 1982). In making this determination, a court considers all of the circumstances involving the defendant and the violations, including factors such as -
- the gravity of harm caused by the violations;
- the extent of the defendant's participation and his degree of scienter;
- whether the violations were isolated or recurrent;
- whether the defendant's usual business activities might involve him in such transactions in the future;
- the defendant's recognition of his culpability; and
- the sincerity of his assurances against future violations.
There was no significant harm to investors from Yang's violations. In the scheme of things, the Schedule 13D violations (which involved Yang's nondisclosure of his own stock purchases) were not terribly significant to the investing public given that Yang accurately disclosed on the forms the purchases of vastly greater amounts of stock by Prestige. And it is unlikely that Prestige experienced any quantifiable harm from Yang's front-running. The market was harmed in the sense that Yang traded based on information (regarding Prestige's impending large purchases) to which only he had access, but the degree of harm was not great due to Yang's limited purchases.
Yang fought and continues to fight the SEC's claims, but in the Court's view, he should not be penalized for this. See SEC v. First City Fin. Corp., 890 F.2d 1215, 1229 (D.C. Cir. 1989). In this regard, it is important to keep in mind that Yang prevailed on the SEC's insider trading claim, which was the centerpiece of the case. That claim was the primary focus of the dispute prior to and during the trial.
On the other hand, Yang was shown to have the level of scienter required to prove the violations, and he was the sole participant (at least the sole direct participant). These ...