Tom, off topic/insider trading law.
Well yes, Tom, you put your finger right on the other half of the argument which I left out.
In Chiarella, the printers case that you refer to, the court ruled that the printer who traded ahead of deals about which he was printing documents, owed no fiduciary duty to his clients, and so was not guilty of insider trading under the fiduciary duty test. Dissenters in the split decision noted that he would have been stealing from his clients, if a contractural arrangement between them prohibited him from divulging or using information in his print jobs.
Thus was born the misappropriation theory of insider trading. That was developed in the Carpenter case, in which Wall Street Journal Heard on the Street columnist Foster Winans was giving his boyfriend Carpenter the names of companies to be mentioned in the column before it was published. The court found that he was violating a clause in his contract giving the Journal ownership of the articles, and exclusive rights to the use of information he developed in those articles. So Winans violated section 14(e) of the 1934 Exchange Act, stating that it is illegal for anyone to "engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer..."
The misappropriation theory, still shakey even after the Carpenter decision, was resoundingly endorsed a few months ago by the U.S. Supreme Court in the O'Hagan decision. This theory now clearly says that if you steal information from your company and use it to trade, then you are carrying out illegal insider trading.
Thus, if your daughter has a contract which prohibits her from divulging any company secretes she learns on the job, if she or someone she deliberately shares it with trades on that information, then that is illegal insider trading.
Unless, of course, you live in Canada, in which case none of this applies.
Happy Investing!
Vanni |
