CASE PRINTOUTS TO ACCOMPANY
WEST’S LEGAL ENVIRONMENT OF BUSINESS
No. 296, Docket 30882.
United States Court of Appeals Second Circuit.
Argued March 20, 1967, Submitted to in Banc Court May 2, 1968.
Decided Aug. 13, 1968.
, Circuit Judge:
This action was commenced in the United States District Court for the Southern District of New York by the Securities and
Exchange Commission (the SEC) pursuant to Sec. 21(e) of the Securities Exchange Act of 1934 (the Act), 15 U.S.C. 78u(e),
against Texas Gulf Sulphur Company (TGS) and several of its officers, directors and employees, to enjoin certain conduct by
TGS and the individual defendants said to violate Section 10(b) of the Act, 15 U.S.C. Section 78j(b), and Rule 10b-5 (17 CFR
240.10b-5) (the Rule), promulgated thereunder, and to compel the rescission by the individual defendants of securities
transactions assertedly conducted contrary to law.(FN1) The complaint alleged (1) that defendants Fogarty, Mollison, Darke,
Murray, Huntington, O'Neill, Clayton, Crawford, and Coates had either personally or through agents purchased TGS stock
or calls thereon from November 12, 1963 through April 16, 1964 on the basis of material inside information concerning the
results of TGS drilling in Timmins, Ontario, while such information remained undisclosed to the investing public generally
or to the particular sellers; [footnote omitted] (2) that defendants Darke and Coates had divulged such information to others
for use in purchasing TGSstock or calls(FN3) or recommended its purchase while the information was undisclosed to the
public or to the sellers; [footnote omitted] that defendants Stephens, Fogarty, Mollison, Holyk, and Kline had accepted
options to purchase TGS stock on Feb. 20, 1964 without disclosing the material information as to the drilling progress to
either the Stock Option Committee or the TGS Board of Directors; and (4) that TGS issued a deceptive press release on April
12, 1964. The case was tried at length before Judge Bonsal of the Southern District of New York, sitting without a jury.
Judge Bonsal in a detailed opinion(FN5) decided, inter alia, that the insider activity prior to April 9, 1964 was not illegal