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Inside Information

Inside Information - Insider trading Inside Information...

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Insider trading: Inside Information: Goodwin v Agassiz Didn’t find liability… relevance of type of information (it was just a theory…highly speculative ‘at most a hope”) implication was that if it was more certain, court may have imposed duty. No fraud b/c no face to face transaction it was on open securities maret. If director personally sought out buyer, transaction would have been closely scrutinized. Securities act = IPO’s etc Securities exchange act = disclosure about securities on an exchange. SEC v Texas Gulf Sulphur Co. Did tgs have to dislcse discovery? No entitled to keep quiet till it bought surrounding land… business judgment protection for disclosure. Court used disclose or abstain rule to find insider info. Everyone should have access to same info before trading Rule applies to anyone w/ material non-public info regardless of insider status or not. EQUAL ACCESS!! Is equal access desirable? Very broad! Disclose or abstain applies to everyone! Not the law today!! Insider could trade on inside info after news has achieved wide distribution. Can’t issue false/misleading info…either no-comment or tell truth…as long as people buy/sell based on that info. Chiarella v US: SC said no violation b/c he was not an insider fo the corporation The duty to abstain from trading unless all material inside info is disclosed arises from relationship of trust b/t corp’s shareholders and its employees. 470 problems: 1. Owes no fiduciary duty to Cousin 2. Would be liable if she was misleading/fraudulent 10b-5 laibility and state common law liability 3. Secret profit issue. Rose probably does have a fiduciary relationship to her principal (George) need to look at agency agreement Juan betty problem: 1. Partnership owes fiduciary duty to eachother. State partnership law liability 2. If there is fraud, there is 10b-5 as well as the common law protections 3.
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