66 Pages Posted: 31 Jan 2009 Last revised: 1 Jul 2013
Recent SEC enforcement actions, such as the case filed against Dallas Mavericks' owner Mark Cuban, raise the question whether deception by a fiduciary is essential to the Rule 10b-5 insider trading offense. Under the Supreme Court's classical and misappropriation theories, the answer is clearly yes - each theory has a fiduciary principle at its core. Yet lower courts and the SEC frequently disregard the Court's explicit dictates, and a consensus is emerging that insider trading rests simply on the wrongful use of material nonpublic information, regardless of whether a fiduciary-like duty is breached. Although this view of insider trading can be justified by the policy objectives underlying the Court's decision in United States v. O'Hagan, it currently lacks a solid doctrinal foundation. To resolve this anomaly, this Article offers specific suggestions that would bring much needed coherence and legitimacy to the law of insider trading.
Keywords: insider trading, fiduciary duty, Rule 10b5-1, Rule 10b5-2, securities fraud, O'Hagan
Suggested Citation: Suggested Citation
Nagy, Donna M., Insider Trading and the Gradual Demise of Fiduciary Principles. Iowa Law Review, Vol. 94, p. 1315, 2009; Indiana Legal Studies Research Paper No. 123. Available at SSRN: https://ssrn.com/abstract=1335494
By Neal Katyal
By Michael Dorf