Saturday, August 5, 2017
I have been at the Southeastern Association of Law Schools (SEALS) conference all week. As usual, there have been too many program offerings important to my scholarship and teaching. I have participated in and attended so many things. I am exhausted.
But I know that all of this activity also energizes me. Once I am back at home tomorrow night and get a good night's sleep, I will be ready to rock and roll into the new academic year (which starts for us at UT Law in a few weeks). I use the SEALS conference as this bridge to the new year every summer.
One of my favorite discussion groups at the conference was the White Collar Crime discussion group that John Anderson and I organized. A number of us focused on insider trading law this year. John, for example, shared his preliminary draft of an insider trading statute. I asked folks to ponder the result under U.S. insider trading law of a tipping case with the following general facts:
- A person with a fiduciary duty of trust and confidence to a principal conveys material nonpublic information obtained through the fiduciary relationship to a third person;
- The recipient of the information is someone with whom the fiduciary has no prior familial or friendship relationship;
- The conveyance is made to the recipient by the fiduciary without the consent of the principal;
- The conveyance is made to the recipient gratuitously;
- The fiduciary’s purpose in conveying the information is to benefit the recipient;
- Specifically, the fiduciary knows that the recipient has the ability and incentive to trade on the information or convey it to others who have the ability and incentive to trade; and
- The fiduciary has clear knowledge and understanding of resulting detriment to the principal.
The question, of course, is whether the fiduciary has engaged in deception that constitutes a willful violation of insider trading proscriptions under Section 10(b) and Rule 10b-5. The answer, based on what we now know under U.S. insider trading law, depends on whether the fiduciary's sharing of information is improper. What do you think? I shared my views and others in the group shared theirs. I may have more to say on this problem and my related work in a later post.