The government must prove that the trader was in possession of the material, non-public information (MNPI), not that the information necessarily served as the basis of the trade.1
The SEC has taken the position that the mere awareness of the information creates a rebuttable presumption of its misuse by the trader.2 In practice, if enforcement authorities are able to prove that the trader’s firm was in possession of the information—and therefore that the trader may have had access to it—this would create a strong inference that the trade was made on the basis of such information and would likely be sufficient to satisfy this element.
The trader would then bear the burden of proving that he did not use the material, non-public information as the basis for the trade (i.e., that the trade would have occurred at the same time and in the same amount, regardless of the trader’s having access to the MNPI).
1 United States v. Rajaratnam, 719 F.3d 139, 157-60 (2d Cir. 2013).
2 See SEC v. Adler, 137 F.3d 1325, 1336-38 (11th Cir. 1998).