In the wake of this case, the SEC needs to re-evaluate its insider trading program. It—or Congress—should clarify that under the misappropriation theory of insider trading, the required relationship of trust and confidence can be created by agreement only if someone who receives material, nonpublic information about a company agrees to keep that information confidential and not trade on it. These are standard terms in corporate nondisclosure agreements.
There is no reason traders should operate under an uncertain legal regime that encourages the SEC to regulate through litigation, at a significant cost to the government, traders and the rule of law.
‘Enforcement 40’ for 2020
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