Insider trading issues

I received an email from a student re insider trading, specifically re what is a tippee.  Take a look at my post a couple of years ago on the Supreme Court case of Salman v. US.

https://profhayesuwla.com/2016/12/07/supreme-court-clarifies-meaning-of-tippee-in-insider-trading-dispute/

The Supreme Court clarified that “a tippee’s liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information.   A tipper breaches such a fiduciary duty, we held, when the tipper discloses the inside information for a personal benefit.”

The Supreme Court then said that a “close personal relationship” is enough as far a receiving a personal benefit.

Keep in mind that many cases require “scienter” i.e., bad intent, intent to avoid a law.  Keep in mind also that the information must be “material non-public information.”

The student also asked whether the same transaction could also violate general securities laws, i.e., a sale of a security that is not registered and not otherwise exempt.  Answer:  Of course and that must be considered.

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