Insider Trading | Brian JM Quinn | February 22, 2013

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Insider Trading

by Brian JM Quinn Show/Hide

Anyone familiar with the law of agency will very quickly understand why insider trading is so troublesome. When an insider uses the information of the corporation for their own benefit, the agent violates their duty of loyalty to the corporation.

Over the years, the jurisprudence of insider trading has evolved to meet the changing landscape of the marketplace. In the following cases we start with classical insider trading theory and then progress to more modern evolutions including liability for insider trading under Federal misappropriation theory.

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  1. 1 Show/Hide More State-based
    Original Creator: Brian JM Quinn
    State-based insider trading liability; classical insider trading theory. Note that state-based claims are derivative claims with the remedy going to the corporation and not to the shareholder bringing the suit.
    1. 2.3 Show/Hide More Tipper/Tippee Liability
      Original Creator: Brian JM Quinn

      What about liability for insider trading in situations where the trading doesn't involve an insider? The knottiest of these problems involve situations where insiders have tipped outsiders who then trade.

      Tipping is a direct challenge to the classical insider trading doctrine and requires some development of the law.

      1. 2.3.1 Show/Hide More Dirks v. SEC
        Original Creator: Brian JM Quinn
        Tipper/Tippee liability
      2. 2.3.2 Show/Hide More SEC. v. Switzer
        Original Creator: Brian JM Quinn
        What are the limits of tippee liability?
      3. 2.3.3 Show/Hide More U.S. v. Chestman
        Original Creator: Brian JM Quinn
        There are many situations in which it might be unreasonable for the court to seek evidence of a breach of fiduciary duty. For example, where a spouse learns inside information and trades on it. The courts and SEC have adapted in response to those situations.
      1. 2.4.1 Show/Hide More U.S. v. O'Hagan
        Original Creator: Brian JM Quinn
        Misappropriation Theory
      2. 2.4.2 Show/Hide More SEC v. Dorozhko
        Original Creator: Brian JM Quinn
        Limits of misappropriation and the level playing field …
      3. 2.4.3 Show/Hide More SEC v. Cuban
        Original Creator: Brian JM Quinn
        Limits on misappropriation theory – is a state-based fiduciary duty still required to establish liability?
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November 13, 2013

corporate securities fiduciary duties

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Brian JM Quinn

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