SEC’S FRIEND INDEED

Rakoff backs US

The maverick judge who made waves scuttling the Securities and Exchange Commission’s nofault deals with Wall Street is taking on another controversial topic: insider trading.

Only this time, Manhattan federal court judge Jed Rakoff is siding with the SEC by refusing a request by two traders to toss a civil insider trading case based on the recent Newman appeals decision.

That December decision narrowed the scope of criminal insidertrading laws— but Rakoff said that civil cases require a lower standard of proof than criminal cases.

“While a person is guilty of criminal insider trading only if that person committed the offense‘ willfully’… a person may be civilly liable if that person committed the offense recklessly,” Rakoff wrote in his decision, released Monday.

Itwas the first time a federal judge has commented on the crucial appeals court decision — called the Newman decision after Todd Newman, the lead defendant in the case.

In the Rakoff case, the SEC had charged two brokers — Daryl Payton and Benjamin Durant— of trading on inside information on IBM’s 2009$ 1.2 billion purchase of software firm SPSS.

Manhattan US Attorney Preet Bharara dropped criminal charges against the two— and three others — after the December appeals court ruling.

The three others settled the civil charges, but Durant and Payton decided to fight.

The two asked Rakoff to dismiss the civil cases based on the Newman decision — but Rakoff denied the motion, saying that the agency “more than sufficiently alleges that defendants knew or recklessly disregarded” information that the tipper in the case received a personal benefit from the man who passed the tips along to Payton and Durant.

Payton and Durant even met at a hotel to discuss what todo if they were contacted by the SEC or other law enforcement, suggesting they knew their behavior was at the least reckless.

Rakoff’s decision was a ray of hope to lawyers whore present investors.

“Hopefully Judge Rakoff’s narrow interpretation of [ the] Newman [ decision] will encourage other judges to protect investors and market integrity,” said lawyer Mark Rifkin.

Rakoff’s earlier controversial decision, in which he refused to approve Citi group’s “neither deny nor admit” settlement with the SEC, was overturned on appeal.