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Old 11-24-2007, 07:56 PM
Soya Soya is offline
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Join Date: Jun 2004
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Default Re: Is This Insider Trading?

As others have pointed out, 2 & 3 are not insider trading, but I think there is a strong case that situation 1 violates Rule 10b-5. You have a fiduciary duty to the shareholders of your company and that duty prevents you from profiting from material, non-public information. If you use that information for you own gain in connection with the purchase or sale of a security, you have defrauded the principal's out of its right to exclusive use of that information in a way that triggers 10b-5. This is known as the misappropriation theory of insider trading and, even though it is vague and a real stretch of the language of 10b-5, it is used with regularity.
I actually know of a situation that mirrors hypo 1--we looked for cases and couldn't find any. Nevertheless, we counseled that there was a real danger of liability for misappropriation.
In this situation the SEC or DOJ would almost certainly file a complaint and, unless you had a lot of resources, one would do well to plea to any reasonable offer.
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