Anthony Chiasson and Todd Newman will be enjoying themselves this evening. Preet Bharara, less so.

A federal appeals court dealt the Justice Department a significant defeat Wednesday, overturning two insider trading convictions and potentially constraining prosecutors’ latitude to pursue such crimes. A three-judge panel of the Second U.S. Circuit Court of Appeals narrowed the definition of what constitutes insider trading and determined prosecutors had taken too broad a view of the law in their multiyear crackdown on Wall Street. The unanimous ruling from the federal appeals court is a stinging rebuke for the Manhattan U.S. attorney’s office, headed by Preet Bharara, which had a near-perfect record in insider trading cases. Its immediate effect is that the convictions of Todd Newman and Anthony Chiasson, two portfolio managers who had appealed their 2012 insider-trading guilty verdicts, are overturned. Prosecutors are likely barred from retrying Messrs. Newman and Chiasson because the court dismissed their indictments with prejudice. The Manhattan U.S. attorney’s office had planned to retry the cases, according to people familiar with the matter.

Court Overturns Insider-Trading Convictions, a Blow to Justice Department [WSJ]