Women Should Not Need to Watch Their Husbands Like [A] Hawk: Misappropriation Insider Trading in Spousal Relationships

57 Pages Posted: 15 Dec 2020 Last revised: 13 Apr 2021

Date Written: October 26, 2020


This article endeavors to sort through and begin to resolve key unanswered questions regarding spousal misappropriation as a basis for U.S. insider trading liability, some of which apply to insider trading more broadly. It identifies and describes misappropriation insider trading liability under U.S. law, recounts and analyzes probative doctrine and policy relevant to spousal misappropriation cases, and (before briefly concluding) offers related observations about the impact of that doctrine and policy on a specific motivating Securities and Exchange Commission ("SEC") enforcement action and other spousal misappropriation cases.

The analysis undertaken in the article supports enforcement actions based on a strong threshold presumption of a relationship of trust and confidence in spousal relations, as recognized by the SEC through its adoption of Rule 10b5-2(b)(3). This support derives from a focus on two fundamental building blocks of spousal misappropriation cases addressed in the article—a broad understanding of deception as it is relevant to these cases and longstanding accepted sociolegal wisdom on the nature of marital relationships as evidenced in the spousal communications privilege. Essentially, marriage is best seen as a relationship of trust and confidence. To the extent a spouse’s breach of that trust or confidence is deceptive and occurs in connection with the purchase or sale of securities, the breach should be deemed to provide a basis for insider trading enforcement (and liability). Market integrity is damaged through marital deception in the same way that it is damaged through the deception by an attorney of a client or the attorney’s law firm partners. Market actors depend on the confidentiality of information shared in marriages as well as information shared in attorney-client relationships and partnerships.

Keywords: insider trading, misappropriation, deception, martial privilege, spousal privilege

JEL Classification: K22, K36, K42, Z13

Suggested Citation

Heminway, Joan MacLeod, Women Should Not Need to Watch Their Husbands Like [A] Hawk: Misappropriation Insider Trading in Spousal Relationships (October 26, 2020). 15 Tenn. J.L. & Pol’y 162 (2020) , University of Tennessee Legal Studies Research Paper No. 407, Available at SSRN: https://ssrn.com/abstract=3743939

Joan MacLeod Heminway (Contact Author)

University of Tennessee College of Law ( email )

1505 West Cumberland Avenue
Knoxville, TN 37996
United States
865-974-3813 (Phone)
865-974-0681 (Fax)

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