dirks v sec

non-1. The SEC argues that, if inside-trading liability does not exist when the information is transmitted for a proper purpose but is used for trading, it would be a rare situation when the parties could not fabricate some ostensibly legitimate business justification for transmitting the information. DIRKS v. SEC 17 IV Under the inside-trading and tipping rules set forth above, we find that there was no actionable violation by Dirks. . 3 . Exchange Act of 1934, 48 Stat. Not only are insiders forbidden by their fiduciary relationship from personally using undisclosed corporate information to their advantage, but they also may not give such information to an outsider for the same improper purpose of exploiting the information for their personal gain. Nor do we imply an absence of responsibility to disclose promptly indications of illegal actions by a corporation to the proper authorities -- typically the SEC and exchange authorities in cases involving securities. . In order to secure their services, the trustee expressly agreed with the employees that they could continue to trade in the securities of the subsidiaries. Secrist surely gave Dirks a gift of the commissions Dirks made on the deal in order to induce him to disseminate the information. Without doubt, breaches of the insider's duty occur most often when an insider seeks personal aggrandizement at the expense of shareholders. To those holding Equity Funding securities he gave the "hard" story - all the allegations; others received the "soft" story - a recitation of vague factors that might reflect adversely on Equity Funding's management. App. 220 U.S.App.D.C. Ante, at 653, n. 10. Similarly, the transactions of those who knowingly participate with the fiduciary in such a breach are "as forbidden" as transactions "on behalf of the trustee himself." 445 See n. 27, infra. See, e. g., Blum v. Bacon, 7 dirks v.sec. U.S. 1014 U.S. 646, 678] A duty to disclose or abstain does not arise from the mere possession of nonpublic market information. The duty is addressed not to the insider's motives, [Footnote 2/10] but to his actions and their consequences on the shareholder. On March 12, he left a message for Herbert Lawson, the San Francisco bureau chief of The Wall Street Journal. Aaron v. SEC, 446 U.S. at 446 U. S. 691. Dirks v. SEW. App. The fact that the SEC, in an exercise of prosecutorial discretion, did not charge Secrist under Rule 10b-5 says nothing about the applicable law. [Footnote 2/3] One of his first steps was to direct his associates at Delafield Childs to draw up a list of Delafield clients holding Equity Funding securities. See supra at 463 U. S. 654-655. U.S. 646, 652] Cf. I. 798, 818, n. 76 (1973) ("The extension of rule 10b-5 restrictions to tippees of corporate insiders can best be justified on the theory that they are participating in the insider's breach of his fiduciary duty"). ] Secrist did pass on his information to regulatory authorities. On its facts, this case is the unusual one. 792, 73d Cong., 2d Sess., 18 (1934); see H. R. Rep. No. Footnote 26 [Footnote 27]. 44 S. E. C., at 648 (concurring in result). [Footnote 2/9] Cf. Cf. [ A duty to dis-close or abstain does not arise from the mere possession of nonpublic market information. Off. [463 Secrist also stated that various regulatory agencies had failed to act on similar charges made by Equity Funding employees. id., at 252, n. 2 (BLACKMUN, J., dissenting) (recognizing that there is no obligation to disclose material nonpublic information obtained through the exercise of "diligence or acumen" and "honest means," as opposed to "stealth"). He uncovered, however, startling information that required no analysis or exercise of judgment as to its market relevance. against this injury. U.S. 646, 675]. . Footnote 24 U.S. 1 Footnote 9 95, 88th Cong., 1st Sess., pt. [463 ), was whether the government needed to prove the elements of a Rule 10b-5 tipping violation from Dirks v.SEC, 463 U.S. 646 (1983), when charging a tipper and tippees with the crimes of wire fraud and securities fraud in Title 18. Open Homework Posted by: saad24vbs Posted on: 24/12/2020 Deadline: 10 Days. Speech of Hamer Budge to the New York Regional Group of the American Society of Corporate Secretaries, Inc. (Nov. 18, 1965), reprinted in The Texas Gulf Sulphur Case -- What It Is and What It Isn't, The Corporate Secretary, No. Footnote 3 341 U.S. at 341 U. S. 271. at 912, n. 15. Dirks v. SEW. 23. Because Dirks caused his clients to trade, he violated § 10(b) and Rule 10b-5. at 912, n. 15; Langevoort, 70 Calif.L.Rev. 21 S.E.C. Alternatively, Judge Wright concluded that, as an employee of a broker-dealer, Dirks had violated "obligations to the SEC and to the public completely independent of any obligations he acquired" as a result of receiving the information. The novelty of this limitation is reflected in the Court's lack of support for it. During the 2-week period in which Dirks pursued his investigation and spread word of Secrist's charges, the price of Equity Funding stock fell from $26 per share to less than $15 per share. [   ] Under certain circumstances, such as where corporate information is revealed legitimately to an underwriter, accountant, lawyer, or consultant working for the corporation, these outsiders may become fiduciaries of the shareholders. Ante at 463 U. S. 661-662. ] Section 17(a), as set forth in 15 U.S.C. See id., at 199. In re Merrill Lynch, Pierce, Fenner & Smith, Inc., 43 S. E. C. 933, 936 (1968). ] In this Court, the SEC appears to contend that an insider invariably violates a fiduciary duty to the corporation's shareholders by transmitting nonpublic corporate information to an outsider when he has reason to believe that the outsider may use it to the disadvantage of the shareholders. Footnote 5 startling information that required no analysis or exercise of judgment as to. The SEC fails to explain, however, why the receipt of nonpublic information from an insider automatically carries with it the fiduciary duty of the insider. 463 U. S. 661-664. Dooley, Enforcement of Insider Trading Restrictions, 66 Va.L.Rev. For purposes of deciding this case, we assume the correctness of the SEC's findings, accepted by the Court of Appeals, that petitioner was a tippee of material inside information. (1972); SEC v. Capital Gains Research Bureau, Inc., 78j(b), He uncovered, however, startling information that required no analysis or exercise of judgment as to its market relevance. Ernst & Ernst v. Hochfelder, supra, at 425 U. S. 199. It makes no difference to the shareholder whether the corporate insider gained or intended to gain personally from the transaction; the shareholder still has lost because of the insider's misuse of nonpublic information.

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