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Simple English definitions for legal terms

misappropriation theory of insider trading

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A quick definition of misappropriation theory of insider trading:

The misappropriation theory of insider trading is when someone trades stock in a company using secret information they got from someone else who trusted them. This is different from the classical theory of insider trading, which only applies when the trader works for the company they're trading stock in. The misappropriation theory says that it's still wrong to trade on secret information, even if you don't work for the company. The U.S. Supreme Court made this rule in a case called U.S. v. O'Hagan. The Securities and Exchange Commission (SEC) also has a rule called Rule 10b5-1 that says you can't trade on secret information.

A more thorough explanation:

The misappropriation theory of insider trading is a type of insider trading where an individual trades stock in a company they are not affiliated with, using material non-public information obtained through a breach of a fiduciary duty owed to the source of the information. This theory does not require that the seller owes a fiduciary duty to the company in whose stock they trade. Instead, the seller's knowledge of insider information alone is enough to create liability under Rule 10b-5.

For example, if a lawyer working on a merger between two companies shares confidential information about the deal with a friend who then trades stock in one of the companies, that friend could be liable under the misappropriation theory of insider trading. Even though the friend had no fiduciary duty to the companies involved, they used confidential information to trade securities.

The misappropriation theory of insider trading was established in the U.S. Supreme Court case U.S. v. O'Hagan in 1997. The court found a partner at a law firm liable for insider trading based on information he obtained from other partners at the firm working on a tender offer. The partner had no fiduciary duty to the companies involved, but the court found him liable because he used confidential information to trade securities.

The Securities and Exchange Commission (SEC) has since codified the misappropriation theory of insider trading in Rule 10b5-1, which prohibits trading on the basis of material non-public information.

Misappropriation | miscarriage (of justice)

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Congrats1!
21:15
Miami A, yall I'm so excited I could cry.
21:15
Feel like I can finally stop holding my breath!! Whew!!!
[] baddestbunny
22:16
every time I get accosted by a strange man who follows me around because my male coworkers were too busy talking to walk me back to my car I get closer to saying we need to bring back traditional gender roles
Dkk
22:32
Nice! @Macaque
Dkk
22:32
@Aromatic, Have to guess.
Dkk
22:33
That sucks @Bunny do you have to go to the hospital?
[] baddestbunny
22:40
I said accosted not assaulted
23:35
guys. my notre dame address just went long is this good or bad
1a2b3c4d26z
23:37
Oooooo me too
23:37
omg is this good or bad
Dkk
23:47
Idk if gender roles are gunna fix that then.
23:49
it looks like most people who applied in october last cycle didn't get a decision until january... does it even mean anything that our addresses went long??
hows ED 2 compared to ED 1?
Dkk
0:10
No idea
windyMagician
0:34
reporting live to say my ndls address also went long
does it mean anything ^
Dkk
2:21
NDLS and Fordham took a very long time last year. It's good info for people to know.
[] baddestbunny
4:29
let’s get after it boys and girls
Dkk
5:21
I gtg to bed soon.
Dkk
5:22
Big day today. Gunna be a crazy one. I will sleep through the first half.
good morning lsd it is 5 am EST
also jazzy my ndls address went long ages ago i sadly do not think it means anything
my stanford address also went long LOL i think at most it's an indicator it's under review
WorthlessAttractiveZombie
7:44
My berkeley paragraph finally disappeared. I definitely think it is just an indicator that they are actively reviewing files, and does not mean anything about A, WL, or Rs
WorthlessAttractiveZombie
7:46
Also has anyone's date disappeared for W&L? Mine did last night
7:55
@WorthlessAttractiveZombie: mine did yesterday morning
7:56
Oops sorry I meant Vilanova. Mine disappeared last week
soapy
8:48
UMN under review! As predicted, decisions are gonna come out early December
Minus those random R decisions from UMN yesterday though right? I wonder what happened there. I don’t think I’ve seen a school start the season out with anything but As on here
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