Wagner v. Royal Bank of Scotland Group

U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Business Law

, New York Law Journal

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Judge Paul Crotty

Under Securities Exchange Act §16(b) Wagner—a LyondellBassell Industries (LBI) shareholder—sought $1.34 million in short swing profits that Royal Bank of Scotland Group PLC and its affiliates (collectively RBS Defendants) purportedly realized from transactions in LBI's securities under swap agreements entered in October and November 2010. Seeking dismissal, the RBS Defendants argued that the subject transactions were exempt from §16(b) because they were "far afield from trading on inside information" and did not implicate concerns animating §16(b). District court denied dismissal. Quoting Blau v. Lamb, the court noted that Second Circuit "ha[s] been clear that Section 16(b) should be applied without further inquiry if there is 'at least the possibility' of speculative abuse of inside information." At the present stage of litigation the RBS Defendants have yet to demonstrate that no such possibility exists. In addition to distinguishing the RBS Defendants' transaction from those at issue in the SEC's no action letters to Goldman Sachs and Davis Polk and Wardwell LLP, district court observed that the RBS Defendants did not argue that they lacked a pecuniary interest in LBI securities, but rather explicitly admitted the opposite thereof.

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