For the purpose of benefitting the corporation o

for the purpose of benefitting the corporation
o Insider Trading: trading on secret information when you’re not supposed
to, 20 years in jail, $10 million fine, it is unlawful to use or employ in
connection with the purchase/sale of any security any manipulative or
deceptive device in contravention of such rules as the SEC may prescribe
 Have to prove 5 things:
1. Defendant bought/sold securities (stock)
2. They knew they were doing something wrong, with intent
(scienter)
3. Did purchase on basis of
4. aterial, non public information
5. The trader owes a duty under the law to disclose or abstain
—who has this duty? (page 139)

1. Company insiders, workers who shares are being
traded (janitor to CEO)
2. Temporary insiders- not on payroll, but brought into
the company (auditors, attorneys, bankers,
consultants)
3. Misappropriator: if one company is getting bought
by another, committing fraud on the source
4. Tipee: if any one related to the above 3 buys stock
because of what they were told, both tipper and
tippee are in trouble


 United States v. Anderson (2008)
o Zomax a CD company knew they would fall short of their sales
expectations and earnings
o Anderson then began to liquidate all the shares he owned
o Jury convicted Anderson of insider trading and gave him 30 months in
prison, and owed a ton of money, he appealed
o Anderson said the information was not material, and he did not trade on
the basis of, and that it was not nonpublic information
o Jury could find that he traded on the basis of nonpublic info, so the
decision is affirmed!

 Granholm v. Heald (2005)
o 2 plaintiffs from out of state filed lawsuits against the three tier system in
Michigan and NY so that they could directly ship their wine to customers
in those states
o both won in local, appellate also won in Michigan but appellate case for
NY guy lost
o these cases got sent to the supreme court and consolidated
o In Michigan, the state allows for in state wineries to ship directly so it’s
discriminatory against other states
o New York says they must develop a distribution operation in NY-
technically the same as in state wineries
o States say out of state direct shipment undermines their abilities to police
underage drinking
o There is no proof that direct shipment increases minor’s access
o State’s tax collection argument was also stated insufficient
o Both laws were invalidated

 Sorrell v. IMS Health, Inc (2011)
o Pharmaceutical manufacturers promote their drugs to doctors through
detailing- a scheduled visit to the office to persuade the doctor to
prescribe a certain drug
o They can be more persuasive when they know the doctor’s background
and info “prescriber-identifying information”
o Vermont passed a law against selling prescriber identifying info

o Data6 miners and manufacturers sued saying it violated freedom of
speech, trial judge upheld the law so they appealed
o Court of appeals reversed it, supreme court got it
o The judgment of the court of appeals was affirmed, law invalid

 Kelo v. City of New London (2005)
o