TreatiseAnswer Book

Insider Trading Law and Compliance Answer Book (2018 Edition)

 by Schulte Roth & Zabel LLP
 
 Copyright: 2017

 Product Details >> 

Product Details

  • ISBN Number: 9781402429804
  • Page Count: 818
  • Number of Volumes: 1
  •  

Because the insider trading laws apply to everyone—not just corporate insiders—a proper understanding of both the basics of insider trading law, as well as some of the complexities and nuances of this important area of the law, is important to anyone who invests in the securities markets. Insider Trading Law and Compliance Answer Book provides you with a step-by-step understanding of the legal requirements imposed upon all investors. It walks you through:

  • The elements of an insider trading claim
  • What is legitimate company research that can be freely acted upon and
  • what is material, nonpublic information obtained in breach of a duty of trust or confidence that may not be acted upon or shared with others
  • When acting on a “tip” or "tipping" others can incur legal liability
  • The framework of penalties when insider trading has been successfully proved

Insider Trading Law and Compliance Answer Book provides both the lawyer and the lay investor with a complete understanding of the civil and criminal issues that can arise, the possible penalties that could be incurred and the defenses available as well as practical advice to ensure compliance with the law of insider trading. The treatise also covers many specialized areas so that the reader can see how the law of insider trading has been applied to corporate insiders, market professionals, paid consultants and government employees as well as in the bankruptcy context.  It reflects the in-depth knowledge of legal practitioners who provide ongoing counseling and litigation representation to a wide array of clients.

In today’s turbulent financial markets, a claim of insider trading often hits the newspapers. Insider Trading Law and Compliance Answer Book fully integrates recent regulatory changes and provides a concise roadmap, helping the reader to navigate the legal requirements safely.

  Table of Contents
  Abbreviations Used in This Book
  Introduction
Chapter 1: Overview of the Law of Insider Trading
  • : Definitions1-2
  • Q 1.1 : What is insider trading?1-2
    • Q 1.1.1 : What is a security?1-2
    • Q 1.1.2 : What is trading “on the basis of”?1-2
    • Q 1.1.3 : What is material information?1-2
    • Q 1.1.4 : What is nonpublic information?1-3
    • Q 1.1.5 : Who is an insider?1-3
    • Q 1.1.6 : Can non-insiders violate insider trading laws?1-4
    • Q 1.1.7 : What is the level of scienter required for insider trading liability? Does recklessness suffice? How about negligence?1-4
  • : Scope of Enforcement1-4
  • Q 1.2 : Do the insider trading laws only apply to corporate officers?1-4
  • Q 1.3 : Do the insider trading laws apply beyond corporate employees?1-5
  • Q 1.4 : Do the insider trading laws apply to government employees who may come into possession of material nonpublic information as a result of their government job?1-5
    • Q 1.4.1 : Are there any specific statutes that regulate insider trading by government employees?1-6
  • Q 1.5 : If I am not employed by or otherwise affiliated with the corporation whose securities I wish to trade, do the insider trading laws apply to my trades?1-6
  • Q 1.6 : Could the prohibition against insider trading apply to me if I do not trade in any securities?1-7
  • Q 1.7 : Who enforces the prohibition against insider trading?1-7
  • Q 1.8 : Are the laws prohibiting insider trading in other countries the same as they are in the United States?1-8
  • Q 1.9 : If I am trading the securities of a foreign issuer outside the United States, does that mean that U.S. insider trading law does not apply?1-8
  • Q 1.10 : What are the penalties for insider trading?1-10
  • : The Policy Debate1-11
  • Q 1.11 : What are the public policies underlying the prohibition against insider trading?1-11
    • Q 1.11.1 : Is insider trading law intended to ensure that everyone has the same information?1-12
  • Q 1.12 : Are there critics of the prohibition against insider trading?1-14
    • Q 1.12.1 : What are the arguments against prohibiting insider trading?1-14
  • Q 1.13 : How does insider trading negatively affect the marketplace?1-15
  • Q 1.14 : Does insider trading have any positive effects on the marketplace?1-16
  • : Evolution and Expansion of the Law1-16
  • Q 1.15 : What are the origins of the prohibition against insider trading?1-16
  • Q 1.16 : Under what statutes is insider trading prohibited?1-17
  • Q 1.17 : How did insider trading law get broadened from corporate officers and directors to also include temporary insiders?1-19
  • Q 1.18 : How did the courts broaden insider trading liability to include tippers and tippees?1-20
    • Q 1.18.1 : What is the test for whether a tipper is liable for insider trading?1-20
    • Q 1.18.2 : What is the test for whether a tippee is liable for insider trading?1-21
  • Q 1.19 : What is the “misappropriation theory” of insider trading?1-23
    • Q 1.19.1 : What are the policies underlying the misappropriation theory?1-24
    • Q 1.19.2 : Has there been criticism of the misappropriation theory?1-25
    • Q 1.19.3 : What is the SEC’s view of the misappropriation theory?1-25
Chapter 2: Statutory Background
  • : Primary Statutes and Rules2-3
  • Q 2.1 : Is there a federal statute that specifically defines insider trading?2-3
    • Q 2.1.1 : How does the legislation proposed in response to Newman seek to define insider trading liability?2-6
    • Q 2.1.2 : Even if none of the current bills pass, does the renewed focus on the lack of federal insider trading legislation make it just a matter of time before the law in this area is codified by statute?2-8
  • Q 2.2 : What existing federal statutes have been interpreted as prohibiting insider trading?2-8
  • Q 2.3 : What is the primary statutory source of liability for insider trading?2-8
  • Q 2.4 : What SEC rule is most commonly invoked in insider trading cases?2-9
  • Q 2.5 : Are there any rules or regulations promulgated by the SEC under section 10(b) that specifically relate to insider trading?2-10
  • : Prohibition on Short-Swing Profits2-11
  • Q 2.6 : Is there a specific section of the 1934 Act that directly addresses insider trading?2-11
    • Q 2.6.1 : How does section 16(b) deter insider trading if liability is automatic (without any proof that the corporate insider was “aware” of material nonpublic information, let alone proof that the insider abused that information for personal trading)?2-12
  • : Insider Trading and Tender Offers2-12
  • Q 2.7 : Does the 1934 Act restrict insider trading in connection with tender offers?2-12
    • Q 2.7.1 : How does Rule 14e-3 differ from Rule 10b-5?2-13
  • : Insider Trading in Commodities Markets2-13
  • Q 2.8 : Does the Commodity Exchange Act restrict insider trading in connection with swaps, futures, and contracts of sale of commodities?2-13
    • Q 2.8.1 : How does CFTC Rule 180.1 differ from SEC Rule 10b-5?2-15
  • : Remedies2-15
  • Q 2.9 : Does any statute expressly recognize a private right of action for insider trading?2-15
    • Q 2.9.1 : What is the meaning of a “contemporaneous trade” under section 20A(a) of the 1934 Act?2-16
    • Q 2.9.2 : What is the meaning of “same class of securities” under section 20A(a) of the 1934 Act?2-16
  • Q 2.10 : What damages can be recovered by a plaintiff who brings an action under section 20A?2-16
  • Q 2.11 : Is there a private right of action under Rule 10b-5 for insider trading violations?2-17
  • Q 2.12 : Does section 10(b) or Rule 10b-5 specify a method of calculating damages?2-17
  • Q 2.13 : What statute permits the SEC to seek civil monetary penalties for insider trading in violation of the 1934 Act?2-17
  • Q 2.14 : What statute empowers the SEC to seek injunctive relief in an insider trading case brought under the 1934 Act?2-18
  • Q 2.15 : What statute empowers the SEC to seek other types of equitable relief, such as disgorgement of profits?2-18
  • Q 2.16 : How can the SEC and the Department of Justice help provide compensation to the victims of insider trading?2-19
    • Q 2.16.1 : What is a “fair fund”?2-19
    • Q 2.16.2 : What is criminal restitution?2-19
    • Q 2.16.3 : What is remission of forfeited property?2-20
  • : Criminal Prosecutions2-21
  • Q 2.17 : What securities laws authorize the criminal prosecution of insider trading violations?2-21
  • Q 2.18 : Have other federal criminal statutes been used to prosecute insider trading?2-21
    • Q 2.18.1 : How do the mail fraud and wire fraud statutes define “financial institution”?2-21
    • Q 2.18.2 : What is the policy underlying longer prison terms for mail or wire fraud affecting a financial institution?2-22
  • Q 2.19 : What other statutes may be implicated in the course of a criminal investigation into insider trading?2-22
Chapter 3: Elements of an Insider Trading Claim
  • : The Classical Theory and the Misappropriation Theory3-3
  • Q 3.1 : What is the classical theory of insider trading?3-3
    • Q 3.1.1 : Who are insiders?3-4
    • Q 3.1.2 : Are noninsiders ever subject to the same insider trading restrictions as insiders?3-5
  • Q 3.2 : What is insider trading under the misappropriation theory?3-6
  • Q 3.3 : Who can assert a claim for insider trading?3-8
  • : Purchase or Sale of a Security3-8
  • Q 3.4 : What constitutes a purchase or sale of a security?3-8
    • Q 3.4.1 : Do the rules apply to taking short positions?3-9
    • Q 3.4.2 : Do the rules apply to puts or calls with respect to securities?3-9
    • Q 3.4.3 : Do the rules apply to the issuance of securities as part of an employee compensation plan?3-9
    • Q 3.4.4 : Do the rules apply to private purchases and sales of securities?3-10
    • Q 3.4.5 : Can an insider use information as a basis for trading in securities of another company as to which he is not an insider?3-10
  • Q 3.5 : What is a “security” for purposes of the insider trading rules?3-11
    • Q 3.5.1 : Do the rules cover only instruments that are traded on a securities exchange?3-11
    • Q 3.5.2 : Do the rules apply to trading in derivatives?3-11
    • Q 3.5.3 : Are notes securities for purposes of the insider trading rules?3-11
    • Q 3.5.4 : Are commodities futures considered securities within the meaning of the insider trading rules?3-12
  • : Trading “On the Basis of” Information3-12
  • Q 3.6 : What does it mean to trade “on the basis of” information?3-12
    • Q 3.6.1 : Is a noninsider who becomes aware of material nonpublic information about a company prohibited from trading in its securities?3-13
    • Q 3.6.2 : Are there any circumstances under which an insider can trade while aware of material nonpublic information?3-13
    • Q 3.6.3 : Can an organization be found liable for trading on the basis of material nonpublic information possessed by an employee—even if the person making the investment decision for the organization was not personally aware of the information?3-14
    • Q 3.6.4 : How can an organization avoid having its employees’ knowledge of material nonpublic information imputed to it?3-14
    • Q 3.6.5 : Can someone who does not actually purchase or sell securities be liable for insider trading?3-14
  • : Material Information3-14
  • Q 3.7 : When is information material?3-14
    • Q 3.7.1 : Is there any specific type of information that will almost always be considered material?3-15
    • Q 3.7.2 : What factors are relevant in determining whether information is material?3-16
  • : Nonpublic Information3-16
  • Q 3.8 : When does information become public so that insider trading restrictions no longer apply?3-16
    • Q 3.8.1 : Does information become public as soon as it is disclosed?3-16
    • Q 3.8.2 : How do you determine whether information has been effectively disseminated?3-17
    • Q 3.8.3 : Is disclosure to a group of securities analysts or group of institutional investors enough to make information public?3-17
    • Q 3.8.4 : Does information become public when an issuer posts it on its public website?3-18
    • Q 3.8.5 : Is the fact that information is included in a filing with a government agency enough to make it public?3-18
    • Q 3.8.6 : Is an issuer required to take specific steps to ensure that information is effectively disseminated to the public?3-18
    • Q 3.8.7 : Are there any rules an issuer must comply with when disclosing nonpublic information?3-19
    • Q 3.8.8 : Does Regulation FD differentiate between intentional and unintentional disclosure?3-19
    • Q 3.8.9 : Does Regulation FD apply to employees and temporary insiders of the issuer?3-20
    • Q 3.8.10 : Does Regulation FD provide specific methods an issuer can use to make sure that information is properly disclosed?3-20
  • : Information Obtained by Breach of Duty3-21
  • Q 3.9 : What kind of breaches of duty are grounds for insider trading liability?3-21
    • Q 3.9.1 : Who owes fiduciary duties to corporate shareholders?3-21
    • Q 3.9.2 : Can someone who receives information from a corporate insider be found liable for insider trading?3-21
    • Q 3.9.3 : What other duties can be the basis for imposing insider trading liability?3-22
  • : Related Prohibitions Applicable to Insiders3-22
  • Q 3.10 : Are there insider trading rules that apply in specific contexts?3-22
  • Q 3.11 : Are there other rules that restrict an insider’s ability to profit from trading?3-23
  • Q 3.12 : Is there any difference between the elements needed to establish criminal insider trading and civil liability?3-23
  • Q 3.13 : Is trading while in possession of material nonpublic information a violation of any laws other than the federal securities laws?3-24
Chapter 4: What Is a Security?
  • : Statutory Definitions4-2
  • Q 4.1 : What is the statutory definition of a “security”?4-2
  • : Judicial Interpretations4-4
  • Q 4.2 : How has the Supreme Court interpreted the statutory definition of “security”?4-4
  • Q 4.3 : How have courts applied and elaborated on the Howey test for investment contracts?4-7
    • Q 4.3.1 : What sort of investment is required?4-7
    • Q 4.3.2 : What is a “common enterprise”?4-8
    • Q 4.3.3 : What forms of “profit” meet the Howey test?4-8
    • Q 4.3.4 : When are profits “solely” from the efforts of others?4-9
  • Q 4.4 : What is the risk capital test for an investment contract?4-9
  • Q 4.5 : How have the courts interpreted and applied the Reves family resemblance test for notes?4-10
  • : Particular Examples4-10
  • Q 4.6 : Is stock always a security?4-10
    • Q 4.6.1 : Does short selling of stock implicate the insider trading laws?4-11
  • Q 4.7 : Are debt instruments such as promissory notes and bank loans securities?4-11
  • Q 4.8 : Are certificates of deposit securities?4-12
  • Q 4.9 : Are puts, calls, and other futures securities?4-12
  • Q 4.10 : Are derivatives such as credit default swaps (CDSs), total return swaps, and other derivative instruments securities?4-13
  • Q 4.11 : Are partnership interests securities?4-15
  • Q 4.12 : Are limited liability company interests securities?4-16
  • Q 4.13 : Are interests in business trusts and real estate investment trusts securities?4-16
  • Q 4.14 : Are real estate interests securities?4-16
  • Q 4.15 : Are variable annuities securities?4-17
  • Q 4.16 : Are employee benefit plans securities?4-17
  • Q 4.17 : Are commodities and managed commodity accounts securities?4-17
  • Q 4.18 : Are franchises and distributorship interests securities?4-18
  • Q 4.19 : Are leasing programs securities?4-18
  • Q 4.20 : Are oil and gas interests securities?4-19
  • Q 4.21 : Are derivative investments such as stock options, index options, and futures securities?4-19
  • Q 4.22 : How has the Internet affected the definition of a security?4-20
Chapter 5: Scienter and Trading “on the Basis of”
  • : Scienter5-2
  • Q 5.1 : What is scienter?5-2
  • Q 5.2 : Is scienter the same as wrongful motive?5-3
  • Q 5.3 : What is the standard for establishing scienter in a civil insider trading case?5-3
  • Q 5.4 : What is the standard for establishing scienter in the tipper-tippee context?5-4
  • Q 5.5 : What is the standard for establishing scienter in criminal insider trading cases?5-6
  • Q 5.6 : Is the “degree” of scienter relevant for purposes of establishing insider trading liability?5-6
  • : Pleading and Proving Scienter5-7
  • Q 5.7 : Is scienter subject to the heightened pleading standards under Rule 9(b)?5-7
  • Q 5.8 : What kind of proof is used to establish scienter?5-8
  • Q 5.9 : What constitutes “circumstantial evidence” of scienter?5-8
  • Q 5.10 : May an individual employee’s scienter be imputed to the company or entity for whom the individual works?5-9
  • Q 5.11 : May materiality affect the scienter analysis?5-10
  • : Trading “On the Basis Of”5-10
  • Q 5.12 : How does the SEC define trading “on the basis of” material nonpublic information?5-10
  • Q 5.13 : Why did the SEC adopt Rule 10b5-1?5-11
  • Q 5.14 : What was the SEC’s rationale for adopting an awareness standard rather than a use standard?5-13
    • Q 5.14.1 : What does it mean to be “aware” of material nonpublic information?5-13
  • Q 5.14.2 : Is knowingly trading on the basis of inside information sufficient to establish scienter?5-14
    • Q 5.15 : Are there any affirmative defenses under Rule 10b5-1?5-14
    • : The Nonuse Defense After Rule 10b5-15-15
    • Q 5.16 : Are the affirmative defenses listed in Rule 10b5-1 the only available defenses?5-15
    • Q 5.17 : Do the courts agree with the SEC that nonuse is not a defense unless one of the affirmative defenses set forth in Rule 10b5-1 is satisfied?5-16
    • Q 5.18 : Does the SEC have the authority to preclude a defendant’s nonuse as a defense?5-17
    • Q 5.19 : Does Rule 10b5-1 apply in criminal cases?5-17
    • : Rule 10b5-1 and Corporate Liability5-20
    • Q 5.20 : May a corporation be held liable if Employee A is aware of material nonpublic information but Employee B, who does the trade, is unaware of that information?5-20
      • Q 5.20.1 : Who bears the burden of proof on this issue?5-20
      • Q 5.20.2 : What does the SEC consider to be “reasonable” policies and procedures?5-21
    • : Rule 10b5-1 Plans5-21
    • Q 5.21 : What are the requirements of a Rule 10b5-1 plan?5-21
    • Q 5.22 : What are the pros and cons of adopting a Rule 10b5-1 plan?5-22
      • Q 5.22.1 : Can a Rule 10b5-1 plan be modified?5-24
      • Q 5.22.2 : Can a Rule 10b5-1 plan be terminated?5-25
    • Q 5.23 : Must a public company disclose a Rule 10b51 plan?5-25
Chapter 6: Materiality
  • : Definitions and Policy Rationales6-3
  • Q 6.1 : What nonpublic information is “material” for purposes of the insider trading laws?6-3
  • Q 6.2 : Can I trade on information that is not “material” but is still nonpublic and comes from a company insider?6-3
  • Q 6.3 : What is the policy rationale behind allowing people to trade while aware of nonmaterial nonpublic information obtained from a corporate insider but not permitting them to trade when that information is “material”?6-4
  • Q 6.4 : Is there a bright line between material information and nonmaterial information?6-4
  • Q 6.5 : What is the definition of materiality?6-6
  • : Evidence of Materiality6-7
  • Q 6.6 : How do the courts, the SEC, and other regulators distinguish between material information and nonmaterial information?6-7
    • Q 6.6.1 : Is certainty required in assessing whether a reasonable investor would consider the information important in making an investment decision?6-8
  • Q 6.7 : How does the test for determining materiality in the context of insider trading law compare to the test for materiality in other securities law contexts?6-9
  • Q 6.8 : Is materiality a question of law, a question of fact, or a mixed question of law and fact?6-9
  • : Examples6-9
  • Q 6.9 : What types of nonpublic information do courts and regulators frequently regard as material?6-9
  • Q 6.10 : What types of material nonpublic information typically give rise to insider trading cases brought by the SEC?6-10
  • Q 6.11 : What types of material nonpublic information typically give rise to criminal insider trading prosecutions?6-11
  • Q 6.12 : What kind of material information is the most common basis for a civil insider trading case?6-11
  • Q 6.13 : What are some examples of nonpublic information that courts and regulators frequently regard as not being material?6-12
  • : The Factual Inquiry6-13
  • Q 6.14 : How do I determine whether information that I possess is material or not material in making an investment decision?6-13
    • Q 6.14.1 : What sort of “facts and circumstances” are important in making a materiality determination?6-14
    • Q 6.14.2 : How important is predicting the likely market impact once the information is disclosed to the market?6-15
    • Q 6.14.3 : How significant is “hindsight bias” in materiality determinations?6-15
    • Q 6.14.4 : When I determine that information is not material, how can I best protect myself against being second-guessed by regulators or prosecutors after the fact?6-16
  • Q 6.15 : What methods do regulators and prosecutors frequently rely upon in determining whether information was material?6-17
  • : How Material Information Can Become Nonmaterial6-17
  • Q 6.16 : Can information that was material lose its materiality, thereby permitting the person or entity to resume trading?6-17
    • Q 6.16.1 : How would a court determine the staleness of previously material information?6-18
    • Q 6.16.2 : How frequently does material information become nonmaterial?6-18
    • Q 6.16.3 : Is there a particular time period after which material information automatically becomes stale and therefore no longer material?6-18
    • Q 6.16.4 : How do the concepts of materiality and nonpublic status overlap?6-18
  • : The Mosaic Theory6-19
  • Q 6.17 : What is the “mosaic theory” and how does it relate to materiality determinations?6-19
    • Q 6.17.1 : May I incorporate material nonpublic information into my mosaic and still trade in the company’s securities?6-19
    • Q 6.17.2 : What policies support the mosaic theory?6-20
    • Q 6.17.3 : What if, after I have used a broad mosaic to decide to trade but before I actually place the trade with a broker, I learn a piece of material nonpublic information?6-21
Chapter 7: Nonpublic Information
  • : Definitions7-2
  • Q 7.1 : What is nonpublic information?7-2
    • Q 7.1.1 : Is all information either public or nonpublic for insider trading purposes?7-3
    • Q 7.1.2 : Is there a clear distinction between public and nonpublic information?7-3
  • Q 7.2 : Do the federal securities laws define nonpublic information?7-3
  • Q 7.3 : What guidance do the SEC Rules provide?7-4
    • Q 7.3.1 : Is public information for insider trading purposes the same as “publicly disclosed” information under SEC disclosure rules?7-5
    • Q 7.3.2 : Why has the SEC resisted calls to provide more concrete guidance about what information is nonpublic?7-5
  • : Determining Whether Information Is Nonpublic7-6
  • Q 7.4 : For insider trading purposes, who decides whether information is nonpublic?7-6
  • Q 7.5 : What is the best evidence that information is public?7-6
  • Q 7.6 : What is the efficient-market hypothesis and how does it relate to whether or not information is public or nonpublic?7-6
    • Q 7.6.1 : Is there any reason to question the efficient-market hypothesis?7-7
    • Q 7.6.2 : Have the courts accepted the efficient-market hypothesis?7-8
  • Q 7.7 : Is it ever permissible to trade while knowing nonpublic information?7-9
  • Q 7.8 : Can insiders ever escape liability for trading based on information they mistakenly believed was public?7-9
  • : How Nonpublic Information Becomes Public7-9
  • Q 7.9 : How does nonpublic information become public?7-9
    • Q 7.9.1 : What factors determine when information is no longer nonpublic?7-10
    • Q 7.9.2 : Does nonpublic information become public immediately upon disclosure?7-11
    • Q 7.9.3 : How widely disseminated must information be to be considered public?7-12
    • Q 7.9.4 : Can information that is available to the public, though difficult to access, still be nonpublic?7-12
    • Q 7.9.5 : What techniques are used to ascertain when information has been assimilated by the market?7-13
  • : Examples7-13
  • Q 7.10 : What kinds of information do courts and regulators typically consider to be nonpublic?7-13
  • Q 7.11 : Must nonpublic information relate to the issuer?7-14
    • Q 7.11.1 : Must nonpublic information be known to the issuer, or can it originate elsewhere?7-14
  • Q 7.12 : Must nonpublic information be important?7-15
  • Q 7.13 : How specific must nonpublic information be?7-15
  • Q 7.14 : Can information disclosed to persons outside the issuer remain nonpublic?7-16
    • Q 7.14.1 : Can information known only to a few investors nonetheless be deemed public?7-17
    • Q 7.14.2 : Can information be considered public even though the issuer has not disclosed it?7-17
    • Q 7.14.3 : Will information posted on an issuer’s website or disclosed in an issuer-sponsored blog be considered public?7-17
  • Q 7.15 : Once a matter is disclosed, can undisclosed details or subsequent developments remain nonpublic?7-18
  • Q 7.16 : Is information provided by sell-side research analysts or sell-side coverage personnel in their research or blast emails public for purposes of the insider trading laws?7-19
Chapter 8: Breach of Duty: Classical Theory
  • : Basic Dimensions of the Classical Theory8-3
  • Q 8.1 : What are the elements of a cause of action under the classical theory?8-3
    • Q 8.1.1 : What is the burden of proof?8-3
  • Q 8.2 : What type of duty is owed under the classical theory?8-4
    • Q 8.2.1 : To whom is the duty owed under the classical theory?8-4
    • Q 8.2.2 : Is this duty a fiduciary duty?8-4
  • Q 8.3 : What are the policies underlying the classical theory?8-5
  • Q 8.4 : How has the classical theory developed?8-5
  • : Insiders8-9
  • Q 8.5 : Who is considered an insider under the classical theory?8-9
    • Q 8.5.1 : Are corporate officers considered insiders?8-10
    • Q 8.5.2 : Are corporate directors considered insiders?8-10
    • Q 8.5.3 : Are lower-level employees considered insiders?8-10
    • Q 8.5.4 : Are employees who obtain information beyond the scope of their duties considered insiders?8-10
    • Q 8.5.5 : Are controlling or majority shareholders considered insiders?8-11
    • Q 8.5.6 : Are noncontrolling shareholders considered insiders?8-11
    • Q 8.5.7 : Are temporary employees considered insiders?8-11
    • Q 8.5.8 : Are outside service providers to a corporate issuer (lawyers, accountants, investment bankers, printers) considered insiders?8-12
    • Q 8.5.9 : Does the theft of material nonpublic information make a person an insider?8-12
    • Q 8.5.10 : Are persons who chance upon material nonpublic information considered insiders?8-12
    • Q 8.5.11 : Are persons tipped by an insider considered insiders?8-13
    • Q 8.5.12 : Are friends and relatives of an insider considered insiders?8-13
    • Q 8.5.13 : Is the corporation itself considered an insider?8-14
  • : Standing to Bring Claims8-14
  • Q 8.6 : What parties have standing to bring an insider trading claim under the classical theory?8-14
    • Q 8.6.1 : Can the SEC bring an enforcement action for insider trading under the classical theory?8-14
    • Q 8.6.2 : Can the CFTC bring an enforcement action for insider trading under the classical theory?8-15
    • Q 8.6.3 : Does the U.S. Attorney have the power to prosecute a criminal violation of the insider trading laws under the classical theory?8-15
    • Q 8.6.4 : Do shareholders have standing to bring an insider trading claim under the classical theory?8-15
    • Q 8.6.5 : Does the corporate issuer have standing to bring an insider trading claim under the classical theory?8-16
    • Q 8.6.6 : Do other market traders have standing to bring an insider trading claim?8-16
  • : Insider’s Duty to Abstain or Disclose8-16
  • Q 8.7 : What are the obligations of an insider who obtains material nonpublic information?8-16
    • Q 8.7.1 : Is an insider who obtains material nonpublic information prohibited from buying or selling the issuer’s securities?8-17
    • Q 8.7.2 : Is an insider liable if he or she decides, on the basis of material nonpublic information, to hold securities?8-17
    • Q 8.7.3 : Is an insider who obtains material nonpublic information required to disclose the information?8-17
    • Q 8.7.4 : Can an insider disclose material nonpublic information to avoid liability?8-18
Chapter 9: Breach of Duty: Misappropriation Theory
  • : Development of the Theory9-3
  • Q 9.1 : Did the “classical theory” of insider trading leave a void exploitable by some traders?9-3
  • Q 9.2 : What is the “misappropriation theory”?9-3
    • Q 9.2.1 : How does the misappropriation theory differ from the classical theory?9-3
  • Q 9.3 : What kinds of activities does the misappropriation theory cover?9-5
  • Q 9.4 : When and why did the government first support adoption of the misappropriation theory?9-9
  • Q 9.5 : Have the courts embraced this theory?9-10
    • Q 9.5.1 : How have the courts applied the misappropriation theory since O’Hagan?9-13
  • Q 9.6 : What are the common law roots of the misappropriation theory?9-14
  • Q 9.7 : Has the government used this theory in both civil and criminal cases?9-14
  • Q 9.8 : Has the government brought cases under both the classical and misappropriation theories?9-16
  • Q 9.9 : What are the elements of an insider trading violation under the misappropriation theory?9-17
  • : Relationships and Duties9-18
  • Q 9.10 : How does the misappropriation theory incorporate fiduciary duty concepts?9-18
  • Q 9.11 : To whom must the duty of trust or confidence be owed for liability under the misappropriation theory?9-18
  • Q 9.12 : In what circumstances does the breach of duty constitute a manipulative or deceptive device in connection with the purchase or sale of securities?9-19
  • Q 9.13 : What constitutes a relationship of trust and confidence sufficient to trigger applicability of the misappropriation theory?9-22
  • Q 9.14 : What kinds of relationships have the courts found to satisfy the “breach of duty” element of the test under the misappropriation theory?9-24
  • Q 9.15 : Is a family relationship between tipper and tippee one that always satisfies the confidential relationship prong?9-25
  • : Rule 10b5-29-27
  • Q 9.16 : Has the SEC promulgated rules regarding when a person will be deemed to have the requisite duty of trust or confidence under the misappropriation theory?9-27
  • Q 9.17 : How have the courts applied Rule 10b5-2?9-28
  • Q 9.18 : Is there reason to believe that these rules exceed the SEC’s rulemaking authority?9-32
  • : Practical Steps to Avoid Violations9-33
  • Q 9.19 : What steps can a provider of material nonpublic information take to prevent someone with whom it shares that information in the ordinary course of business from trading on the basis of that information?9-33
  • Q 9.20 : Can an employer be liable if one of its employees or agents misappropriates information from a third party and then trades on it?9-33
  • Q 9.21 : What can an employer do to prevent its employees from misappropriating information from itself or a third party?9-35
  • Q 9.22 : Can the recipient of information under a confidentiality agreement do anything to require public disclosure of the confidential information so as to be able to resume trading?9-37
Chapter 10: Tipper and Tippee Liability
  • : Definitions and Basic Principles10-2
  • Q 10.1 : What is a “tipper” and what is a “tippee”?10-2
  • Q 10.2 : How is tipper-tippee liability established under the insider trading laws?10-2
  • Q 10.3 : What constitutes a “personal benefit”?10-4
  • Q 10.4 : If a tippee does not know that he or she was provided information in breach of a fiduciary duty, can the tippee still be exposed to insider trading liability?10-10
  • Q 10.5 : Can a tipper be held liable where the tippee has not been found to have had sufficient awareness of the tipper’s breach of fiduciary duty?10-11
  • Q 10.6 : If only the tipper and tippee were present at the time of an alleged tip, and both deny that material nonpublic information was communicated, can either still be found to have engaged in insider trading?10-12
  • Q 10.7 : If the tippee does not trade, can the tipper still be liable for insider trading?10-12
  • : Remote Tippees10-14
  • Q 10.8 : If a tippee does not trade, but instead communicates the material nonpublic information to someone else—that is, a “remote tippee”—can the remote tippee be held liable? How about the original tippee?10-14
  • Q 10.9 : Can remote tippees be liable even if they do not know the original source of the material nonpublic information?10-15
  • Q 10.10 : Can remote tippees be liable if they do not know that the original source received a personal benefit in exchange for divulging the information?10-15
  • : Penalties10-16
  • Q 10.11 : What penalties can the government seek in tipper-tippee cases?10-16
  • : Tipper-Tippee Liability and Tender Offers (Rule 14e-3)10-18
  • Q 10.12 : What is Rule 14e-3’s antitipping prohibition?10-18
  • Q 10.13 : To whom does the Rule 14e-3 antitipping prohibition apply?10-19
  • Q 10.14 : Does Rule 14e-3 also establish liability for tippees who trade?10-19
  • Q 10.15 : What constitutes a “substantial step” toward the commencement of a tender offer for purposes of tippee liability under Rule 14e 3?10-20
  • Q 10.16 : Does Rule 14e-3 provide any exceptions that would allow purchases in advance of a tender offer?10-21
  • Q 10.17 : Is there a safe harbor from liability under Rule 14e-3’s antitipping prohibition?10-21
    • Q 10.17.1 : What constitutes “good faith” under the safe harbor?10-22
  • Q 10.18 : Can a company face insider trading liability where its employee has tipper-tippee liability?10-23
Chapter 11: Regulation Fair Disclosure
  • : Policies Underlying Regulation FD11-3
  • Q 11.1 : What is Regulation FD?11-3
  • Q 11.2 : Why did the SEC adopt Regulation FD?11-3
  • Q 11.3 : What is the relationship between Regulation FD and traditional insider trading laws?11-5
  • Q 11.4 : Is there a private right of action under Regulation FD?11-5
  • Q 11.5 : How has the SEC enforced Regulation FD?11-5
  • : Required Disclosures11-6
  • Q 11.6 : How does Regulation FD work?11-6
    • Q 11.6.1 : What is a prompt disclosure?11-6
    • Q 11.6.2 : What is the difference between an intentional disclosure and one that is unintentional?11-7
    • Q 11.6.3 : What is material information?11-8
    • Q 11.6.4 : What is “nonpublic” information?11-9
    • Q 11.6.5 : What is a “public” disclosure?11-9
  • : Disclosure via Website11-10
  • Q 11.7 : Is a disclosure made on an issuer’s website a “public” disclosure?11-10
    • Q 11.7.1 : What makes a website a recognized channel of distribution?11-11
    • Q 11.7.2 : How is information adequately disseminated to the marketplace on a website?11-12
    • Q 11.7.3 : How can a company disseminate material information via social media websites such as Facebook and Twitter?11-13
    • Q 11.7.4 : What is a reasonable time period for the public to react to information on a company’s website?11-14
  • : Scope Issues11-15
  • Q 11.8 : Whose conduct does Regulation FD target?11-15
    • Q 11.8.1 : Does Regulation FD cover only disclosures by issuers or are disclosures by others covered as well?11-15
    • Q 11.8.2 : Can someone who receives selective disclosure of material nonpublic information and subsequently trades based upon that information be liable under Regulation FD if that person is not a senior official of the issuer?11-16
  • Q 11.9 : What disclosures fall outside Regulation FD?11-17
    • Q 11.9.1 : What if a disclosure is made pursuant to a confidentiality agreement?11-17
  • Q 11.10 : To avoid violating Regulation FD, does an issuer need to use the identical language in its public and private disclosures?11-18
  • Q 11.11 : When an issuer learns that its public disclosure did not adequately communicate the intended message, what steps can it take under Regulation FD to clarify or amplify its message?11-19
  • Q 11.12 : If a corporate insider provides an analyst with material nonpublic information that the analyst knows is material and nonpublic, does Regulation FD bar the analyst from trading or recommending that others trade on the basis of that information?11-20
  • : Evolution of Regulation FD11-21
  • Q 11.13 : How has Regulation FD changed since its adoption?11-21
  • Q 11.14 : Has Regulation FD achieved its intended purpose?11-22
  • : Related Disclosure Rules of the Self-Regulatory Organizations11-26
  • Q 11.15 : How have the self-regulatory organizations addressed the disclosure of material information?11-26
    • Q 11.15.1 : What rules has the NYSE adopted?11-26
    • Q 11.15.2 : What rules has Nasdaq adopted?11-26
    • Q 11.15.3 : What rules has FINRA adopted?11-27
Chapter 12: Obtaining Information from Corporate Insiders
  • : Types of Corporate Insiders12-2
  • Q 12.1 : What is the definition of a corporate insider?12-2
  • Q 12.2 : Who can be a corporate insider?12-3
  • Q 12.3 : What is a temporary insider?12-3
  • Q 12.4 : How can I find out who is a corporate insider for a particular company?12-3
  • : Contacting Insiders12-4
  • Q 12.5 : Are there any restrictions on contacting corporate insiders?12-4
  • Q 12.6 : Are there any risks associated with retaining a consultant to assist in obtaining information from corporate insiders?12-5
  • Q 12.7 : Are there any restrictions on which corporate insiders I can speak with?12-5
  • Q 12.8 : If Regulation FD may prevent corporate insiders from sharing material nonpublic information about their company with me, and the insider trading laws prohibit me from trading in the company’s securities while aware of such information, why would I ever want to talk with corporate insiders?12-6
  • Q 12.9 : In conducting due diligence, must I take precautions to avoid receiving certain information?12-6
  • Q 12.10 : Will I be protected if I first tell the corporate insider that I am not interested in material nonpublic information?12-6
  • Q 12.11 : Are there any restrictions on what I can or cannot ask a corporate insider?12-7
  • : Obligation to Disclose or Abstain from Trading12-7
  • Q 12.12 : What should I do if I receive material nonpublic information from a corporate insider?12-7
  • Q 12.13 : What if I am unsure as to whether the information is public or not public?12-8
  • Q 12.14 : What if I am unsure as to whether the information is material or immaterial?12-8
  • Q 12.15 : If I receive material nonpublic information from a corporate insider, do I have to report receiving that information to any regulators?12-9
  • Q 12.16 : Do my obligations differ if I did not ask for the specific information?12-9
  • Q 12.17 : How long does my obligation to abstain or disclose last?12-9
  • Q 12.18 : Is my employer deemed to know whatever material nonpublic information that I know?12-9
  • Q 12.19 : Is my family deemed to know any material nonpublic information that I obtain from a corporate insider?12-10
  • : Compliance12-10
  • Q 12.20 : Are there policies and procedures that should be adopted or followed with respect to obtaining information from corporate insiders?12-10
Chapter 13: Application of the Insider Trading Laws to Government Employees
  • : Scope of the STOCK Act13-3
  • Q 13.1 : What is the STOCK Act?13-3
  • Q 13.2 : Does the STOCK Act run afoul of the Speech or Debate Clause of the U.S. Constitution?13-3
  • Q 13.3 : Does the STOCK Act apply to government employees who are not part of the legislative branch?13-4
  • Q 13.4 : What are the Act’s disclosure requirements?13-4
  • : Effects13-5
  • Q 13.5 : What is the Act’s effect on participation in IPOs?13-5
  • Q 13.6 : How does the Act affect job negotiations with federal employees?13-5
  • Q 13.7 : Have there been any investigations, civil actions, or criminal prosecutions as a result of the STOCK Act?13-6
  • : Political Intelligence Firms13-8
  • Q 13.8 : What are political intelligence firms?13-8
    • Q 13.8.1 : Does the Act ban political intelligence firms?13-9
    • Q 13.8.2 : How does the Act affect political intelligence firms?13-9
    • Q 13.8.3 : Do political intelligence firms need to register under the Act?13-10
  • : Penalties13-10
  • Q 13.9 : What are the consequences for violating the Act?13-10
  • : Liabilities of Government Employees Outside the STOCK Act13-10
  • Q 13.10 : Has any member of Congress ever been arrested or prosecuted for insider trading?13-10
  • Q 13.11 : Were members of Congress allowed to trade on nonpublic information learned as a result of their government positions before the STOCK Act was enacted?13-11
  • Q 13.12 : Does the Act affect preexisting congressional ethics rules?13-12
  • Q 13.13 : Have any other theories been advanced to prosecute insider trading involving government employees?13-12
Chapter 14: Information Sharing with Market Professionals
  • : Liability of Market Professionals in General14-3
  • Q 14.1 : What laws and regulations impose insider trading liability on market professionals?14-3
  • Q 14.2 : What types of market professionals are most likely subject to insider trading liability?14-4
  • Q 14.3 : When do insider trading prohibitions arise for market professionals?14-5
  • Q 14.4 : Can insider trading restrictions arise for prospective business relationships?14-14
  • Q 14.5 : Can market professionals be liable for insider trading violations when they neither trade nor tip?14-16
  • : Consultants and Advisers14-18
  • Q 14.6 : What insider trading restrictions do consultants or advisers typically face with current clients?14-18
  • : Lawyers14-20
  • Q 14.7 : What specific insider trading restrictions do lawyers typically face?14-20
  • : Investment Bankers14-23
  • Q 14.8 : What insider trading restrictions do investment bankers typically face?14-23
  • : Research Analysts14-26
  • Q 14.9 : What insider trading restrictions do research analysts typically face?14-26
  • : Business News Reporters14-30
  • Q 14.10 : What insider trading restrictions do business news reporters face?14-30
  • : Broker-Dealers and Traders14-32
  • Q 14.11 : What insider trading restrictions do brokers and traders typically face?14-32
    • Q 14.11.1 : Can information received from corporate insiders give rise to insider trading liability for brokers and traders?14-33
    • Q 14.11.2 : Can customer trading information give rise to insider trading liability for brokers and traders?14-35
  • : Hedge Funds and Other Investors14-36
  • Q 14.12 : What insider trading restrictions do hedge funds and other investors typically face?14-36
    • Q 14.12.1 : When does information sharing between hedge funds give rise to insider trading issues?14-42
    • Q 14.12.2 : What are the insider trading risks associated with using expert networks to obtain information?14-43
    • Q 14.12.3 : Can hedge funds and other investors use “market color” as the basis for making trading decisions?14-44
    • Q 14.12.4 : Can a hedge fund or investor owe a duty for insider trading purposes to a potential counterparty?14-45
  • : Compliance Programs14-46
  • Q 14.13 : What should market professionals do to protect against insider trading liability?14-46
Chapter 15: Use of Consultants
  • : Overview of Risks15-3
  • Q 15.1 : Why do some investors use consultants as part of their research efforts?15-3
  • Q 15.2 : What insider trading risks are raised by the use of consultants?15-3
  • Q 15.3 : Do certain types of consultants raise more concerns than others?15-3
  • Q 15.4 : Do consultants who are current employees of a public company automatically violate Regulation Fair Disclosure in speaking with investors if they share material nonpublic information about the issuer that employs them?15-4
  • Q 15.5 : Is it safe to use a consultant who is not a current employee of a public company?15-5
    • Q 15.5.1 : What are the obligations of former directors, officers, and employees generally?15-5
    • Q 15.5.2 : What if the consultant is subject to a confidentiality agreement?15-6
  • Q 15.6 : Are there risks even in using a consultant who was never an employee of a public company?15-8
  • : Information Received from Consultants15-11
  • Q 15.7 : Is there any exposure if I receive background information from the consultant but do not make my trading decision based on that information?15-11
  • Q 15.8 : Can I avoid liability by asking only about industry information, as opposed to company-specific information?15-12
  • Q 15.9 : What should I do if, in response to a general question, the consultant provides a specific, detailed answer that appears to contain material nonpublic information?15-12
  • Q 15.10 : Can I avoid liability by telling the consultant up front not to divulge material nonpublic information and that I do not want to be restricted?15-13
  • Q 15.11 : What if I obtain a written confirmation from the consultant that he or she has not divulged material nonpublic information?15-13
  • : Compliance Procedures and Other Ways to Reduce Risk15-14
  • Q 15.12 : What compliance procedures should I put in place when dealing with consultants to protect against insider trading liability?15-14
  • Q 15.13 : Does using a consulting service (or “expert network firm”) eliminate all insider trading risks?15-16
  • Q 15.14 : Does the safe harbor of section 28(e) of the Securities Exchange Act of 1934 insulate me from insider trading liability if I use “soft dollars” to pay a research firm?15-17
  • : Regulatory Actions15-18
  • : Enforcement Actions and Prosecutions Based on the Use of Consultants15-18
  • Q 15.15 : Has any government agency brought enforcement actions or criminal prosecutions based on the use of consultants?15-18
    • Q 15.15.1 : Have enforcement actions or criminal prosecutions been brought for the use of consultants offering government information?15-18
    • Q 15.15.2 : Has the use of consultants led to the SEC finding deficiencies in a firm’s policies and procedures?15-20
    • Q 15.15.3 : Have enforcement actions or criminal prosecutions been brought for the use of consultants offering information on drug trials?15-22
    • Q 15.15.4 : Have enforcement actions or criminal prosecutions been brought against consulting firms and those that use them?15-23
  • Q 15.16 : Is it acceptable to leave compliance to the consultant?15-25
    • Q 15.16.1 : Am I safe in assuming that the consultant (or “expert network” firm) has adequate policies and procedures in place to protect me from any possible insider trading liability?15-25
Chapter 16: Tender Offers
  • : Origins of Section 14(e) and Rule 14e-316-2
  • Q 16.1 : Are there special rules relating to trading on the basis of material nonpublic information in the context of a tender offer?16-2
  • Q 16.2 : What types of offers does Rule 14e-3 apply to?16-3
  • Q 16.3 : Why did the SEC adopt Rule 14e-3?16-3
  • Q 16.4 : When do prohibitions on insider trading in the context of tender offers apply?16-4
    • Q 16.4.1 : What constitutes a “substantial step” toward commencing a tender offer?16-4
  • : Scope of Rule 14e-316-4
  • Q 16.5 : What are the elements to prove a violation of Rule 14e-3?16-4
  • Q 16.6 : How is Rule 14e-3 different from Rule 10b-5, the more general antifraud provision pursuant to which most insider trading cases are brought?16-5
    • Q 16.6.1 : Is Rule 14e-3 a valid exercise of the SEC’s rulemaking authority?16-6
  • Q 16.7 : When is nonpublic information relating to a tender offer “material”?16-7
  • Q 16.8 : Can a violation of Rule 14e-3 be prosecuted as a criminal offense?16-7
  • Q 16.9 : Does a trader have to know that the information relates to a tender offer for liability to attach?16-7
    • Q 16.9.1 : Is this true even in a criminal prosecution?16-8
  • Q 16.10 : Can liability under Rule 14e-3 be established on a showing of mere negligence?16-8
    • Q 16.10.1 : Is this true even in a criminal prosecution?16-9
    • Q 16.11 : Must the government show that a trader used the material nonpublic information in deciding to trade?16-9
  • Q 16.12 : May a company be held liable under Rule 14e-3 where Employee A knows of the material nonpublic information but Employee B, who trades on behalf of the company, does not know of the information?16-9
  • Q 16.13 : Does Rule 14e-3 have a specific provision for tipper liability?16-9
    • Q 16.13.1 : When does liability attach for tipping under Rule 14e-3?16-10
  • : Exemptions, Remedies, and Private Actions16-10
  • Q 16.14 : What exemptions are available under Rule 14e-3?16-10
  • Q 16.15 : What remedies can the SEC seek in an insider trading case relating to a tender offer?16-10
  • Q 16.16 : Is there a private right of action under Rule 14e-3?16-10
    • Q 16.16.1 : Who can bring a private action under Rule 14e-3?16-11
    • Q 16.16.2 : What remedies can be sought in a private suit?16-11
Chapter 17: Private Investments in Public Equity (PIPEs)
  • : PIPEs in General17-3
  • Q 17.1 : What is a PIPE?17-3
  • Q 17.2 : How are investments in PIPEs typically offered and sold?17-4
  • Q 17.3 : Since the issuer’s stock price usually falls when a PIPE is announced, how do PIPE investors protect against such losses?17-5
  • : Insider Trading Risks Arising out of PIPEs17-6
  • Q 17.4 : How can PIPE investors become restricted from trading?17-6
    • Q 17.4.1 : What are the practical implications of becoming restricted from trading following a typical PIPE solicitation?17-6
  • Q 17.5 : Under what circumstances has a prospective investor accepted, explicitly or implicitly, a duty of confidentiality and therefore assumed a duty to disclose prior to trading while aware of information about a forthcoming PIPE?17-7
    • Q 17.5.1 : Under what circumstances may a duty of trust or confidence arise by express agreement?17-8
    • Q 17.5.2 : Do confidentiality agreements need to be explicit in order to give rise to a duty of trust or confidence?17-9
  • Q 17.6 : Can a prospective PIPE investor inadvertently become restricted by gaining unsolicited knowledge of the upcoming offering?17-10
    • Q 17.6.1 : What are best practices for placement agents to use when contacting prospective PIPE investors?17-11
    • Q 17.6.2 : What can a prospective PIPE investor do to avoid inadvertent restrictions on trading?17-12
  • Q 17.7 : What type of liability may attach to those who trade while in possession of material nonpublic information regarding upcoming PIPE offerings?17-13
    • Q 17.7.1 : Has the SEC been the only regulator investigating PIPE transactions for potential insider trading?17-14
  • Q 17.8 : Is knowledge of an upcoming PIPE offering per se material?17-16
  • Q 17.9 : What theories underlie violations involving section 5 of the 1933 Act?17-17
  • : SEC Actions Involving PIPEs17-18
  • Q 17.10 : How successful has the SEC been in settling PIPE cases?17-18
  • Q 17.11 : How successful has the SEC been in litigating PIPE cases?17-22
  • Q 17.12 : In light of SEC v. Cuban, is proof of an investor’s agreement not to trade necessary for insider trading liability, or is an agreement to keep information confidential, without a promise to abstain from trading, enough?17-25
    • Q 17.12.1 : What was the SEC’s case against Cuban?17-26
    • Q 17.12.2 : On what grounds did the district court initially dismiss the case?17-27
    • Q 17.12.3 : What questions did the Fifth Circuit leave unanswered?17-28
    • Q 17.12.4 : On what grounds did the court deny Cuban’s motion for summary judgment?17-30
    • Q 17.12.5 : Where does Cuban leave the PIPEs industry?17-33
Chapter 18: Out-of-Court Restructurings, the Bankruptcy Context, and Creditors’ Committees
  • : Applicability of Securities Laws18-2
  • Q 18.1 : Do the federal securities laws apply to the purchase and sale of securities of companies that file for protection under of the Bankruptcy Code?18-2
    • Q 18.1.1 : Which insider trading theories may apply in bankruptcy situations?18-2
  • : Access to Information18-4
  • Q 18.2 : Who may obtain access to material nonpublic information during an out-of-court restructuring or bankruptcy case and under what circumstances?18-4
  • Q 18.3 : What kind of material nonpublic information would likely be obtained in a bankruptcy case or restructuring?18-6
  • Q 18.4 : How would a person obtain access to material nonpublic information in a bankruptcy case or restructuring?18-7
    • Q 18.4.1 : How does a person obtain voluntary disclosure by the debtor?18-7
    • Q 18.4.2 : How does a person compel disclosure by the debtor?18-8
  • Q 18.5 : Why would a person request access to material nonpublic information?18-8
  • Q 18.6 : When a borrower in a restructuring or debtor in a bankruptcy case provides material nonpublic information, what are the typical restrictions on its use by recipients?18-9
  • Q 18.7 : Are there means to participate in a restructuring or bankruptcy case without obtaining access to material nonpublic information?18-10
  • : Trading18-11
  • Q 18.8 : If you trade in a debtor’s securities, can you serve on a creditors’ committee?18-11
  • Q 18.9 : If an institution serves on a creditors’ committee and receives material nonpublic information, is there a way for other parts of the institution to trade the securities of the debtor?18-12
    • Q 18.9.1 : What is the purpose of a trading order?18-13
    • Q 18.9.2 : What procedures are imposed in a typical trading order?18-13
    • Q 18.9.3 : What are the consequences of noncompliance with a trading order?18-14
  • Q 18.10 : Is bank debt a security governed by the securities laws?18-14
  • Q 18.11 : Can you trade in a debtor’s bank debt obligations while in possession of material nonpublic information?18-16
    • Q 18.11.1 : What duties may be imposed on those who would trade in bank debt?18-17
    • Q 18.11.2 : How can an investor avoid breaching such duties?18-18
    • Q 18.11.3 : Can information barriers provide protection?18-18
    • Q 18.11.4 : Can Big Boy letters provide protection?18-18
  • Q 18.12 : Have the SEC or other regulatory bodies brought actions against committees or committee members for misusing material nonpublic information obtained by participation in the bankruptcy case?18-20
  • : Disclosure That Ends Trading Restrictions18-21
  • Q 18.13 : If someone is restricted from trading because he or she received material nonpublic information, under what circumstances will the restriction terminate?18-21
    • Q 18.13.1 : If a public filing by a debtor contains what previously was deemed material nonpublic information, is a restricted person now “cleansed” for trading purposes?18-22
Chapter 19: Big Boy Letters
  • : Why Big Boy Letters Are Used19-3
  • Q 19.1 : What is a Big Boy letter?19-3
  • Q 19.2 : Who typically uses Big Boy letters, and why?19-3
  • Q 19.3 : What are the typical terms of a Big Boy letter?19-4
  • : Enforceability Under Federal Securities Laws19-5
  • Q 19.4 : Are the terms of a typical Big Boy letter enforceable under section 10(b) of the 1934 Act?19-5
  • Q 19.5 : How does the antiwaiver provision of section 29(a) of the 1934 Act affect Big Boy letters?19-9
  • Q 19.6 : Can Big Boy letters be useful even if they are unenforceable?19-17
  • Q 19.7 : Has the SEC taken a position on the enforceability of Big Boy letters?19-17
  • Q 19.8 : Does the protection of a Big Boy letter extend to claims asserted by a downstream purchaser?19-19
  • : State Law Liability19-21
  • Q 19.9 : Can Big Boy letters protect a party from liability under state law?19-21
  • : Drafting Effective Terms19-26
  • Q 19.10 : What terms should be included in a Big Boy letter?19-26
Chapter 20: Civil and Criminal Enforcement
  • : Enforcement Responsibilities20-3
  • Q 20.1 : Who is responsible for civil and criminal enforcement of insider trading laws?20-3
  • Q 20.2 : Do insider trading laws differ between the civil and the criminal context?20-4
  • Q 20.3 : How many civil insider trading charges are brought each year by the SEC?20-4
  • Q 20.4 : How do the authorities decide whether to bring criminal charges?20-4
  • Q 20.5 : What are parallel proceedings?20-6
    • Q 20.5.1 : When parallel proceedings are filed, how do the courts decide which one goes first?20-6
  • : Developing Cases20-7
  • Q 20.6 : How do the DOJ and SEC develop insider trading cases?20-7
    • Q 20.6.1 : How does the Financial Industry Regulatory Authority assist the government in developing insider trading cases?20-9
  • Q 20.7 : How do the SEC and the DOJ use their concurrent jurisdiction in insider trading cases?20-9
  • Q 20.8 : How do the DOJ and SEC obtain evidence and testimony?20-10
  • Q 20.9 : Do the DOJ and the SEC use cooperation agreements to develop insider trading evidence?20-11
  • Q 20.10 : Are insider trading charges ever joined with other fraud charges by the SEC or the DOJ?20-12
  • : Wiretaps20-12
  • Q 20.11 : Are wiretaps frequently used in insider trading cases?20-12
    • Q 20.11.1 : How are wiretaps obtained?20-13
    • Q 20.11.2 : Are wiretaps frequently suppressed?20-13
    • Q 20.11.3 : Is there a way to tell if your phone is tapped?20-14
  • Q 20.12 : Can the government listen to privileged conversations with a lawyer during a wiretap?20-15
  • Q 20.13 : Are banks or brokerage firms required to notify a customer if a subpoena has been issued for the customer’s records?20-15
  • : Sanctions20-16
  • Q 20.14 : What sanctions can the SEC seek for insider trading?20-16
  • Q 20.15 : What sanctions does the SEC typically get?20-17
  • Q 20.16 : Do the sanctions differ in settled cases versus litigated cases?20-17
  • Q 20.17 : What does the SEC do with the penalties it receives?20-19
  • Q 20.18 : What sanctions can the DOJ seek for insider trading?20-19
  • Q 20.19 : How is a criminal insider trading sentence range calculated?20-19
  • Q 20.20 : What sort of sentences do defendants convicted of insider trading usually receive?20-20
  • Q 20.21 : What sort of penalties are imposed on corporate defendants in insider trading cases?20-21
  • Q 20.22 : Does it make a difference if someone pleads guilty or is convicted after a trial?20-22
  • Q 20.23 : Does the Mandatory Victim’s Restitution Act apply to insider trading?20-22
Chapter 21: Penalties, Short-Swing Profits, and Whistleblower Awards
  • : Penalties21-5
  • Q 21.1 : What penalties exist for insider trading?21-5
  • Q 21.2 : What civil penalties are available to the SEC?21-5
  • Q 21.3 : What is the SEC’s statutory authority to seek civil penalties?21-6
  • Q 21.4 : How does the SEC obtain civil penalties?21-6
  • Q 21.5 : What if someone refuses to pay a civil penalty?21-7
  • Q 21.6 : Are civil penalties limited to those who trade on inside information?21-7
  • Q 21.7 : Is the SEC limited with respect to imposing civil penalties on those persons who do not trade on inside information?21-8
  • Q 21.8 : How are civil penalties measured?21-9
  • Q 21.9 : Where do the proceeds of civil insider trading penalties go?21-10
  • Q 21.10 : Is there a statute of limitations with respect to civil insider trading penalties?21-10
  • Q 21.11 : Does the SEC have the authority to seek criminal penalties for insider trading?21-10
  • Q 21.12 : May criminal penalties be imposed on top of civil penalties?21-11
  • Q 21.13 : Does the payment of a civil penalty bar imposition of criminal penalties?21-11
  • Q 21.14 : What other types of financial penalties or remedies can arise from insider trading liability?21-11
  • : Short-Swing Profits Liability21-12
  • Q 21.15 : What is short-swing profits liability?21-12
  • Q 21.16 : Who is subject to such liability?21-12
  • Q 21.17 : To be liable, must a person possess inside information?21-13
  • Q 21.18 : What is the purpose of short-swing profits liability?21-13
  • Q 21.19 : How are short-swing profits recovered?21-14
  • Q 21.20 : How are short-swing profits calculated?21-14
  • Q 21.21 : Do any exemptions exist with respect to short-swing profits liability?21-15
  • Q 21.22 : Do any provisions other than section 16(b) impose liability for short-swing profits?21-18
  • : Whistleblower Awards21-19
  • Q 21.23 : What is a whistleblower award in the context of insider trading?21-19
  • Q 21.24 : What is the source of funds to pay a whistleblower award?21-19
  • Q 21.25 : Under what circumstances is a whistleblower award paid?21-20
  • Q 21.26 : Are whistleblower award determinations appealable?21-20
  • Q 21.27 : Is the identity of a whistleblower confidential?21-21
  • Q 21.28 : What are the consequences of retaliation against whistleblowers?21-21
  • Q 21.29 : Has the SEC actually distributed any whistleblower awards?21-22
Chapter 22: Protecting Firms Through Policies and Procedures, Training, and Testing
  • : Compliance Programs Generally22-3
  • Q 22.1 : Are investment advisers and broker-dealers required to implement compliance programs relating to insider trading?22-3
  • Q 22.2 : Does having a compliance program relating to insider trading insulate a firm from liability?22-4
  • : Policies and Procedures22-4
  • Q 22.3 : How do you develop appropriate policies and procedures related to insider trading?22-4
  • Q 22.4 : What policies and procedures relating to insider trading should a company that issues public securities have?22-5
  • Q 22.5 : What policies and procedures relating to insider trading should a broker-dealer have?22-6
  • Q 22.6 : What policies and procedures relating to insider trading should a “buy-side” investment firm (for example, a mutual fund, pension fund, hedge fund) have?22-7
  • Q 22.7 : What policies and procedures relating to insider trading should a service provider (for example, a law firm, consultant, auditor) have?22-8
  • Q 22.8 : Can firms rely on standardized or form policies and procedures?22-9
  • Q 22.9 : Should policies and procedures addressing insider trading be broadly worded or more specific and detailed?22-9
  • : Training22-9
  • Q 22.10 : Are there legal requirements for how to train personnel with respect to insider trading?22-9
  • Q 22.11 : Who at the firm should be in charge of developing and implementing the insider trading policies and procedures?22-10
  • Q 22.12 : How often should training sessions be held for employees and others covered by the firm’s insider trading policies and procedures?22-10
  • Q 22.13 : Are there occasions that call for special training sessions?22-11
  • Q 22.14 : What are the best formats for training?22-11
  • Q 22.15 : How can a firm make training effective?22-11
  • Q 22.16 : Should training be conducted in small groups or in large groups?22-12
  • Q 22.17 : How should a firm update its training materials?22-12
  • Q 22.18 : How frequently should those materials be updated?22-12
  • Q 22.19 : What measures can a firm use to evaluate the effectiveness of its training with respect to insider trading?22-13
  • : Testing22-13
  • Q 22.20 : What does the SEC mean by “testing”?22-13
  • Q 22.21 : Are firms required to engage in testing with respect to insider trading?22-14
  • Q 22.22 : Can software be used in testing?22-14
  • Q 22.23 : Does testing require time-consuming reviews of random emails, instant messages, and other electronic communications?22-14
  • Q 22.24 : If a firm identifies an insider trading problem, how should that affect its policies and procedures, training, and testing?22-15
Chapter 23: Insider Trading Law in the United Kingdom
  • : Sources of Insider Trading Law in the United Kingdom23-2
  • Q 23.1 : What are the sources of the U.K. insider trading law?23-2
  • Q 23.2 : Who enforces the prohibition against insider trading?23-3
  • : Covered Securities23-4
  • Q 23.3 : What securities are covered by the civil market abuse regime?23-4
    • Q 23.3.1 : What is a “regulated market”?23-5
    • Q 23.3.2 : What is a “multi-lateral trading facility” (MTF)?23-5
    • Q 23.3.3 : What is an “organized trading facility” (OTF)?23-5
    • Q 23.3.4 : What are the examples of related financial instruments that are also subject to EU MAR?23-5
  • Q 23.4 : What securities are covered by the criminal insider dealing regime?23-6
  • : Elements of Insider Dealing in the United Kingdom23-6
  • Q 23.5 : What are the elements of insider dealing in the civil market abuse regime?23-6
    • Q 23.5.1 : Who is an “insider” in the civil market abuse regime?23-7
    • Q 23.5.2 : What is “inside information” in the civil market abuse regime?23-8
    • Q 23.5.3 : What does it mean to use information for the purpose of dealing?23-10
  • Q 23.6 : What are the elements of insider dealing in the criminal insider dealing regime?23-11
    • Q 23.6.1 : Who is an insider in the criminal insider dealing regime?23-11
    • Q 23.6.2 : What is inside information in the criminal insider dealing regime?23-11
    • Q 23.6.3 : What does “dealing” mean?23-12
  • : Tipper-Tippee Liability23-13
  • Q 23.7 : Is there a concept of “tipper-tippee” liability in the civil market abuse regime?23-13
  • Q 23.8 : Is there a concept of “tipper-tippee” liability in the criminal insider dealing regime?23-14
  • : Defenses to Insider Dealing23-15
  • Q 23.9 : What defenses are available in the civil market abuse regime?23-15
  • Q 23.10 : What defenses are available in the criminal insider dealing regime?23-16
  • : Territorial Scope23-17
  • Q 23.11 : What is the territorial scope of U.K. insider trading offenses in the civil market abuse regime?23-17
  • Q 23.12 : What is the territorial scope of U.K. insider trading offenses in the criminal insider dealing regime?23-18
  • : Penalties23-18
  • Q 23.13 : What are the penalties for insider trading in the United Kingdom?23-18
  Index

  Please click here to view the latest update information for this title: Last Update Information  
 

Share
Email
UPKEEP SERVICE
Your purchase will also sign you up for “Upkeep Service,” whereby you will receive future automatic shipments of updates, new editions and supplements to this edition, as they become available, for a 30-day preview. Updates, new editions and supplements published within 90 days of your purchase will be issued free of charge; all other updates will be subject to an additional charge if kept beyond the preview period, invoiced at the time of delivery. This service will continue until canceled by you at any time. See here.

  • FOLLOW PLI:
  • twitter
  • LinkedIn
  • GooglePlus
  • RSS

All Contents Copyright © 1996-2017 Practising Law Institute. Continuing Legal Education since 1933.

© 2017 PLI PRACTISING LAW INSTITUTE. All rights reserved. The PLI logo is a service mark of PLI.