6) Insider trading: general

Question 1

insider: def

Answer 1

1) learns of material, nonpublic info bc of corporate position OR
2) has fiduciary rship to corporation or to P

can be temporary

Question 2

insider only responsible if

Answer 2

TRADED ON THE INFO (must disclose or abstain)

Question 3

tipper liability

Answer 3

1) disclose material nonpublic info to others AND
2) in breach of fiduciary duty (loyalty)

consider personal benefit test

Question 4

tipper liability: personal benefit test

Answer 4

did insider get a personal benefit in exchange for the info? (direct or indirect)

Question 5

tippee liable if

Answer 5

receive material nonpublic info disclosed in breach of duty by insider AND

• -knew or should have known insider was breaching a duty AND
• -trade on info or exchange for personal benefit

Question 6

traditional insider trading requires

Answer 6

breach by insider

Question 7

misappropriation – applies to

Answer 7

anyone who violates duty of trust and confidence (not just insiders) –> duty to not disclose is owed to the source of the info

Question 8

misappropriation: result

Answer 8

can prosecute under 10b-5 even if no tudty to issuer or its shareholders – bc breach of trust/confidence owed to the source of the info

Question 9

misappropriation includes

Answer 9

Congress ppl and gvt officials