A recent Third Circuit opinion that scrapped a nearly four-year prison sentence for a former Simpson Thacher & Bartlett LLP managing clerk convicted in a $5.6 million insider trading scheme is consistent with a wider pattern by the appeals court of taking a hard look at sentencing overreaches, court watchers say.

In finding that prosecutors failed to show defendant Steven Metro was aware of a third individual trading on the information he'd provided, the Third Circuit made clear that without evidence a defendant was working in concert with a third party, it is not appropriate to hold him responsible for that party's gains.

"This was a great example of the Third Circuit pushing back on what I view as overzealous sentencing advocacy," said Ballard Spahr Partner David L. Axelrod.

"It's going to really push prosecutors in the Third Circuit — and even the Second Circuit — to show evidence in cases where defendants plead guilty," he said. "They're going to need to come forward with good evidence to show the scope of an insider trading conspiracy."

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