A Heart as Far from Fraud as Heaven from Earth...Or Not
Northwestern University - School of Law
March 21, 2011
Northwestern University Law Review, Vol. 106, No. 4, 2012
Northwestern Public Law Research Paper No. 11-53
In 2008 the SEC indicted Dallas Mavericks owner and media mogul Mark Cuban for insider trading based exclusively on information obtained while under an oral confidentiality agreement. The government argued that this agreement was sufficient to establish the necessary duty required under misappropriation theory based on SEC Rule 10b5-2(b)(1) passed in 2000. This note argues that a confidentiality agreement is insufficient for establishing the requisite fiduciary or fiduciary-like relationship under misappropriation theory. Further, this note argues that the SEC’s attempt to circumvent the requirement for a fiduciary or fiduciary-like relationship by promulgating Rule 10b5-2(b)(1) overreaches the power given to the SEC under the Securities Exchange Act.
Number of Pages in PDF File: 44
Keywords: 10b5-2(b)(1), 10b-5, Cuban, Insider trading, misappropriation theory, confidentiality agreement
JEL Classification: K22Accepted Paper Series
Date posted: May 28, 2011 ; Last revised: June 18, 2011
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