The Securities and Exchange Commission suffered a setback last week in its efforts to prosecute individuals for insider trading after a judge dismissed the charges on a case from 2001.

U.S. District Court Judge Graham Mullen dismissed insider trading charges by the SEC against John F. Mangan Jr., founder and former partner of Charlotte money management firm Mangan and McColl Partners LLC.

Mangan was accused of directing short sales of stock of CompuDyne Corp. while he was working for Friedman, Billings, Ramsey, in expectation that private investment in public equity transactions of CompuDyne would hedge those sales.

In October, Judge Mullen threw out an SEC charge of a Section 5 violation, pertaining to the sale of unregistered securities. When reviewing the charge of insider trading, Mullen permitted Mangan to submit evidence in his defense.

"We knew that once we had the opportunity to present our facts in this case, we would prove Mr. Mangan's complete innocence," said Mangan's co-counsel, George Covington of King & Spalding.

"I fought this case because I knew that I did nothing wrong," Mangan said in a statement. "I could not allow the SEC to derail my career over unfounded accusations.”

A spokesman for the SEC said the commission is disappointed with the decision and is considering its options.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.