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|2||Show/Hide More||SEC v Texas Gulf Sulphur|
|3||Show/Hide More||Tipper/Tippee Liability|
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. Because the recipient of inside information does not have a fiduciary duty to the shareholders or the corporation, classical insider trading theory does not extend to recipients of inside information. Courts have responded to these situations by finding ways to extend liability to recipients of inside information, “tippees”. Because courts built tippee liability for insider trading on an ediface of fiduciary duty, the reach of liability can at times be limited.
|3.4||Show/Hide More||U.S. v. Chestman|
|4||Show/Hide More||Misappropriation Theory|
Classical insider trading theory generates liability for insiders, temporary insiders, and tippees in the event any of them trade in the stock of the corporation to which they own a fiduciary duty while in possession of material inside information.
However, this classical theory has an obvious limitation. Under the classical theory of insider trading, there is no liability if the insider uses the material inside information of the corporation to trade in the stock of ANOTHER corporation and not the corporation to which the insider has a fiduciary duty.
The following cases lay out the courts' response to the limitations of the classical insider trading theory while holding on to its fiduciary duty core.
|4.3||Show/Hide More||SEC v. Dorozhko|
Brian JM Quinn
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