I should be a prime candidate to support the lengthening of the financial reporting cycle from three to six months, as the White House—and many others—now say they want the SEC to do. I want public corporations to be more sustainable and managed for the long run and doubt that they currently are to a sufficient degree. America and the world need large firms willing and able to build for a shared future, not just deliver dividends and capital gains to investors in the here and now.
So if I thought that going to semi-annual reporting would move the markets … Read more
The Second Circuit’s en banc decision in SEC v. Texas Gulf Sulphur Corp. (“TGS”) is approaching its 50th anniversary, and it’s still well-known for several important holdings. Perhaps the most celebrated (or condemned) accepted the SEC’s argument that corporate insiders have a duty to “abstain or disclose” from trading while in possession of material nonpublic information. The opinion makes a bold claim that the law in play (Rule 10b-5’s antifraud prohibition) “is based in policy on the justifiable expectation of the securities marketplace that all investors trading on impersonal exchanges have relatively equal access to material information.”… Read more
If someone had asked me back in the mid-1980s whether an insider trading case required proof that the tippee was aware that the tipper was acting for personal gain, I would have said yes without much hesitation, because that’s what the Supreme Court had said in Dirks. To be sure, awareness has a great deal of elasticity, because Dirks used the phrase “knows or should know,” and personal benefit can come in a variety of soft forms. But one big implication from this common understanding was that selective disclosure to investment analysts would ordinarily not constitute insider tipping, because … Read more
I agree with much that was said in earlier postings on the implications of Halliburton II going forward. We simply don’t know how lower courts will structure the price distortion inquiry, and if the mess the courts have made of loss causation is any indication (and I realize that the burden there is on the plaintiffs, not the defendants), we shouldn’t expect coherence. I hope courts will bring a great deal of common sense to the process, and not be fooled into thinking—as so many of the members of the Court seemed to at oral argument—that event studies will offer … Read more
The Supreme Court’s very recent decision in the Amgen case addressed whether a “merits” issue—the materiality of the alleged misstatement or omission—is such a predicate to the fraud-on-the-market presumption established in Basic Inc. v. Levinson that it must be proved (or at least subject to rebuttal) as part of class certification. The Court said no by a 6-3 majority, surprising many. I have written a reader’s guide to Amgen and the future of the presumption of reliance. It explains the surprise (the pro-plaintiff outcome in contrast to the general trend in the class action case law) as a consequence of … Read more
William Cary’s opinion for the SEC in In re Cady, Roberts & Co. built the foundation on which the modern law of insider trading rests. Today, we have a stable framework of three distinct legal theories—the classical theory, the misappropriation theory, and Rule 14e-3—each of which is well understood as to its basic elements. Most insider trading cases handed down in any given year say nothing particularly new about the state of the law, but rather simply apply familiar principles to sometimes challenging facts. But every so often we do discover something new about the core conception(s) of insider trading. … Read more