Overview

Prosecutors routinely charge a conspiracy along with insider trading offenses.  18 USC § 371 prohibits conspiracy to commit a federal offense and conspiracy to defraud the US.  Both provide alternative bases of insider trading liability.

Generally, a conspiracy charge alleges that two or more persons agreed together to accomplish some unlawful objective (e.g., to commit securities fraud).  A conspiracy to commit insider trading is an entirely separate and different offense from a substantive insider trading offense, the commission of which may be an object or a purpose of the conspiracy.  Since the gravamen of a conspiracy is an unlawful agreement, it does not matter if the substantive crime was committed.

Elements

Generally, the liability for conspiracy arises when:

1. two or more people agree to commit an unlawful act
2. with the specific intent of committing such unlawful act, and
3. one co-conspirator commits at least one “overt act” in furtherance of the conspiracy.¹

Unlawful Agreement

For the prosecution to prove a conspiracy, there needs to be a showing that two or more people were in agreement to commit a crime.²  The agreement may be evidenced by word or by action; that is, the government may prove the existence of an agreement either by direct evidence or by circumstantial evidence from which the agreement may be inferred.³

Specific Intent

All conspirators must have the specific intent to commit the objective of the conspiracy, meaning that someone who is entirely unaware that (s)he is participating in a crime cannot be charged with conspiracy.⁴

Overt Act

Prosecutors must prove that one co-conspirator took an “overt act” in furtherance of the crime.  This act does not have to be illegal.  Rather, the act must merely be a step taken in furtherance of the criminal objective (e.g., executing a trade).⁵  A single overt act by any of the conspirators in furtherance of the plot will suffice.⁶

The act must take place after the group of individuals agreed to conspire.  While an “overt act” implies an affirmative action, some courts have held that silence can be an overt act where it is intentional, planned, and done in furtherance of the conspiracy.⁷

Benefits of a Conspiracy Charge for Prosecutors

A conspiracy charge offers many advantages to prosecutors over a substantive insider trading charge, including:

• the underlying crime or object of the conspiracy does not need to have been committed for the perpetrators to be held liable;
• there are significantly fewer elements to prove than in a traditional, substantive insider trading charge (proof of material benefit, breach of duty, etc.); 
• the elements that need to be proven are less complicated and are less prone to dramatic shifts in judicial interpretation; 
• the statute of limitations period does not begin to run until the commission of the last overt act in furtherance of the conspiracy;
• under the Federal Rules of Evidence, the statement of a co-conspirator is admissible against all the other conspirators;
• each member of a conspiracy is liable for the foreseeable acts of all co-conspirators irrespective of personal participation or assistance (known as  Pinkerton liability); and 
• venue is proper in any district in which an overt act in furtherance of the conspiracy was committed, so that an international telephone call or email by one co-conspirator may bring all co-conspirators within jurisdictional reach.