Inside Trading at the Second Circuit

Insider Trading Law Explained Neither Section 10(b) of the Securities Exchange Act of 1934 nor Rule 10b-5 of the Securities and Exchange Commission (SEC) expressly forbids insider trading.  Nevertheless, insider trading is considered a type of securities fraud which is prohibited by the Act and the Rule.  The classical theory holds a corporate insider (such as an officer or director) violates Section 10(b) and Rule 10b-5 by trading in the corporation’s securities on the basis of material, nonpublic information about the company.  Such trading would constitute a breach of the fiduciary duty owed shareholders of the corporation.  The case-law on insider trading is both exhaustive and exhausting. Recently, the U.S. Court of Appeals for the Second Circuit had occasion to clarify the law in a widely-discussed case, U.S. v. Newman, Nos. 13-1837, 13-1917. In May of 2013, Todd Newman and Anthony Chiasson were convicted in Federal District Court for the…

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