Insider Trading Flashcards
SEC pushes the ____ theory of insider trading
equal access
Classic insider trading is that fiduciaries of companies cannot ___
use info they receive as insiders for their own benefit
If a tippee ____ they have a duty to disclose
knows tip from somebody who breached fiduciary duties
Corporate governance issue in insider trading is that if legal executives may ___
manage corporation to maximize trading opps instead of for corporate value
Directors have a statutory duty to disclose under __
SEC requirements to provide material info about financial condition if publicly traded
Insider trading can raise claim under state law under __
Kahn v. KKR
DGCL 141 gives directors lots of discretion ___
as to what they tell their investors
In KKR, the court predicated insider trading on __
unjust enrichment based on misuse of confidential corporate info
Counterargument to why insider trading a good idea
reveals info to the market
Response to positive insider trading theory
- hedge funds won’t enter if must compete with better informed insiders
- insider’s gain another trader’s loss
Courts have pushed back against SEC saying that just having info ___
doesn’t give duty to disclose
Under SEC 16b corporate directors officers and principal SHs must ___
disclose every transaction in corporations equity securities
What is a principal SH
at least 10% ownership
16B authorizes a SH to bring derivative action ___
to recover any short-swing gains resulting from trading of statutory insiders
Chiarella says that duty to disclose is necessary to __
make silence fraudulent
Chiarella held that if the purchaser of stock has no ____ no duty to disclose
fiduciary or insider status
the court found that chiarella printer was not ___ whom the sellers had ___
an agent, placed trust and confidence
Rule 14e-3 creates duty to disclose or abstain from ___
info obtained from an insider related to tender offer nonpublic info
Chiarella says that not every instance of financial unfairness ___
constitutes fraudulent activity
Chiarella use of info was not ___ unless __
fraud under 10b5, affirmative duty to disclose
Dirks was told assets of Equity Funding were ____
exaggerated due to fraudulent corporate practices by former officer
Dirks told ____
clients about info who then traded
The court found that Siecrest (former officer) didn’t violate fiduciary duty because ___
motivation was to expose fraud not to personally benefit
O-Hagan is about ___
misappropriation theory
O’Hagan held that a person is guilty of securities fraud when he ___
misappropriates confidential info in breach of duty to source of info
What did O’Hagan do
partner in law firm not on tender offer deal but traded on it
O’Hagan found that 14e3 was ___
proper use of SEC rulemaking authority
O’Hagan violated fiduciary duty to ___ NOT __
law firm and Grand Met (sources of info) , Pillsbury (trading party in which he bought)
The court affirms the SEC rulemaking power because ___
knows difficult to enforce tender rules and so it is empowered to choose means of enforcement (even if not explicit in the statute)
