A judge was right to throw out a jury's securities fraud conviction of a former New York Stock Exchange floor trader because prosecutors did not prove their case, a federal appeals court ruled on Friday.
In an unusual move last year, a Manhattan federal court judge tossed out the verdict against David Finnerty, who was found guilty of fraud in October 2006 for allegedly making illegal trades that cheated the exchange's customers out of $4.5 million. The judge, Denny Chin, said prosecutors did not prove that the customers were deceived.
U.S. prosecutors appealed that decision, but a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit ruled unanimously that the lower court made the correct call.
"On appeal, the government presses a number of arguments in support of its prosecution theory," Chief Judge Dennis Jacobs wrote in the ruling. "We are unpersuaded."
The U.S. Attorney's Office in Manhattan, which prosecuted the case, declined to comment. A lawyer for Finnerty was not immediately available.
Prosecutors originally charged 15 former NYSE floor traders, also known as specialists, with fraud in April 2005, contending that they traded ahead of or between customer orders and generated millions in illegal profits between 1999 and 2003. The government had mixed results in prosecuting the traders and ultimately dropped several of the cases.
Specialists have access to "buy" and "sell" orders funneled into the NYSE for the stocks they are assigned to, giving them an edge over others who do not see that information. Under exchange rules, they can only trade for their firms' accounts to dampen volatility or add liquidity to the market.
Finnerty, who had been accused of making 26,000 improper trades, had worked at Fleet Specialist Inc, which is now known as Banc of America Specialist, a unit of Bank of America Corp.
(Reporting by Martha Graybow; editing by John Wallace)
