After Gregory Bolan quit as a research analyst for Wells Fargo & Co. in Nashville, Tenn., his former colleague, trader Joseph Ruggieri, gave him a set of keys to Mr. Ruggieri’s Manhattan apartment to help him as he interviewed for jobs in New York.
This seemingly innocuous favor was cited by the Securities and Exchange Commission, when it filed civil charges last year against both men alleging insider trading.
The agency said the gesture of friendship helped demonstrate that Mr. Bolan benefited from allegedly tipping Mr. Ruggieri about his upcoming market-moving reports on several stocks from April 2010 through March 2011, when they still worked together.
Now, the supposed benefit is at the center of a courtroom battle—the latest in a string of legal challenges stemming from a landmark appeals-court ruling in December that raises the bar for prosecutors and the SEC in proving insider trading.
The two men intend to file a motion Thursday, seeking the dismissal of all charges against them as a result of the appeals-court ruling, according to Mr. Bolan’s lawyer, Sam Lieberman. The men deny wrongdoing and say the SEC’s case doesn’t meet the new standard set by courts. ...
Prosecutors and the SEC “in a lot of ways…have been quite cavalier” about assuming that friendships are sufficient to satisfy the personal-benefit test in insider-trading cases, said Stephen Bainbridge, a law professor at the University of California, Los Angeles. That’s set to change, he added: “The days when you could just allege that [the tipper and trader] were buddies and talked to each other are clearly over.”