LAW 3111H Lecture Notes - Lecture 27: Fiduciary, Plano Real, Insider Trading
Pg 480
Insider Trading
Scientific research corp, potential to discovery scientific breakthrough
Before research is confirmed
CEO purchases call options of BIM stock
Is she liable? (says this is complete secret)
1a.
In order to have insider trading
Must have material information!
-Material: probability of magnitude test (for future information)
- Probability (dont know could be small)
- Magnitude! Very high!
- Good argument to say it is material :D
- Substantially likely if a reasonable investor will use this information
1c.
Chemist, employee, has a predetermined agreement
10b-1 exception:
- He has a written plan that was already agreed on
- Not going to be prosecuted even if u have material nonpublic information
Bad plan bc u can Increase or decrease amount of purchases
- Good safe harbor to set up plan
- But your plan has to essentially be fixed
- It's not a real plan if u can buy or reduce the amount
- His plan is flexible thus it is not a good plan
Maximize position: hey broker (in charge or portfolio) i want to buy 2% of stock
every month
I’ll give you control → you can change my purchases
2a.
Tipper / Tippee Liability
1. Breach of fiduciary duty
2. She should know or know that this is a breach of fiduciary duty
3. Personal benefit for Elebert
Document Summary
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