Tipper/Tippee Liability | Brian JM Quinn | November 15, 2013

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Tipper/Tippee Liability

Original Creator: Brian JM Quinn Current Version: Brian JM Quinn Show/Hide

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.

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  1. 1 Show/Hide More Dirks v. SEC
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    Tipper/Tippee liability
  2. 2 Show/Hide More SEC. v. Switzer
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    Not all tippees will be subject to liability for trading on a corporation’s materail, confidential inside information. In the case that follows, the court tests the limits of liabilty for tippees.
  3. 4 Show/Hide More U.S. v. Chestman
    Original Creator: Brian JM Quinn Current Version: 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.
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May 30, 2014

insider trading corporate

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Brian JM Quinn

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