“A federal appeals court strengthened the Securities and Exchange Commission’s hand in insider-trading cases, ruling that defendants can be liable not only for the personal profits from illegal trades but for money generated for their employers.

“The U.S. Second Circuit Court of Appeals said in a 2-1 decision that Joseph Contorinis, a former portfolio manager at Jefferies Group Inc.’s asset-management unit who was convicted of insider trading in 2010, must forfeit $7.26 million, a sum that represents both his profits on the illegal trades as well as the gains by his employer.

“It was previously unclear if defendants could be held liable for profits made by their employers, but Tuesday’s ruling could have an impact on a number of civil insider-trading cases in New York, legal experts said.

“Tamar Frankel, a professor at Boston University School of Law, said the decision could become a deterrent to insider trading as well as a greater incentive to cooperate because of heftier financial consequences. “This is a punishment that hits the pocket,” said Ms. Frankel.”

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