The United States District Court for the Southern District of New York has granted summary judgment in favor of defendants in a Section 16(b) action brought by Clarus Corporation. Clarus had alleged insider short-swing profits from 'packaged trades' by a broker-dealer and its CEO.
Judge John P. Cronan ruled that the transactions fell within the exception in Section 16(d) of the Exchange Act, which exempts transactions by a dealer in the ordinary course of business and incident to over-the-counter market making. The court found the broker-dealer qualified as a market maker and the trades were 'incident to' these activities.
This decision resolves a legal matter for Clarus, clarifying the applicability of Section 16(b) to complex trading strategies. The ruling prevents the imposition of short-swing liability on the defendants, which was the basis of Clarus's claim.
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