To: Fundamentls who wrote (58561 ) 8/12/2000 7:44:22 PM From: LPS5 Respond to If you have no such relationship with a company or its employees, and discover something on your own, the fact that it is non-public is not material. Many investors discover important facts about companies that only they are privy to, and they may or may not choose to share it with others. is potentially liability. Read below: srz.com Over the last three decades, two theories of liability emerged for insider trading. The "traditional" theory covers actions by corporate insiders like officers or directors, or temporary insiders like investment bankers or lawyers working for the company whose securities are being traded. Under this theory, the duty not to trade the securities is based on the duty owed to the corporation's shareholders not to gain a personal advantage through the use of nonpublic information about the corporation's securities. the misappropriation theory was developed. It covers improper uses of market-sensitive information by "outsiders" who gain access to nonpublic information by abusing a relationship of trust and confidence owed to someone who does not have an obligation to thec orporation's shareholders. The doctrine has been applied (although not consistently) to a variety of corporate outsiders, including bankers, lawyers, arbitragers, financial printers, reporters and psychiatrists for abusing relationships with employers, parents, newspaper readers and patients by trading on inside information. Whether a participant in a securities transaction owes a duty of a type that brings insider trading liability is often a complex question of fact-finding and hindsight interpretation. But there is no reason such participants should be subject to so much uncertainty. Thus, whether or not the Supreme Court upholds the misappropriation theory in the O'Hagan case, Congress should define and prohibit insider trading under both theories. Without altering the fraud provisions of Section 10(b), Congress should add to the 1934 law a ban on insider trading proposed by the S.E.C. and the American Bar Association in 1987. The proposal would:
