It's good that the court somewhat clarified previously-fuzzier law. The underlying problem is that insider trading as a crime is so <i>ad hoc</i> to begin with. TFA notes the hodgepodge of agencies, laws, regulation, rulings, etc. that "define" insider trading today. I doubt if <i>any</i> legal thinker's interpretation of the current understanding were codified into a single bill, that that bill could pass in Congress. Codifying what currently exists would make obvious what a boon it is for powerful executives. A codification of what the public imagines exists, would never get past those executives' lobbyists.<p>Nearly all executives trade in the securities of the corporations that employ them. Very few are ever charged with insider trading. (I'm not suggesting they should be!) However, whenever company management catches wind of transactions that annoy them, they always have a friendly ear at the prosecutor's office.<p>Long before major stock [EDIT:] moves, many "insiders" knew what was coming. Perhaps some told themselves, like Madoff, that they could get everything turned around. Regardless, insiders know before the public knows. Insider trading prohibitions serve to prolong the public's ignorance, and so deepen the public's trading losses. No one is better placed to dance right up to the line concerning investment decisions and public disclosure, than the firm's executives are. That's why the majority of insider trading prosecutions that succeed, are against outsiders like Martha Stewart or the subjects of TFA. Insider trading is a crime because it's valuable for the executive class to punish early defectors.
There seems to be a fundamental logical error in the explanation given here:<p>"As the court recognized, the reasoning of Dirks compels this conclusion. The Supreme Court ruled that to be liable a tippee must know that the insider leaked the information in breach of a duty. The Court in Dirks also held that breach of a duty was established if the insider received some personal benefit in exchange for the leak. Logically, therefore, proof the tippee knew there was a breach of duty means proof the tippee knew that the insider received some personal benefit."<p>It would have to be the case that a breach of a duty can <i>only</i> be established if the insider received some personal benefit in exchange for the leak, in order for the conclusion to hold.
There was obviously a reason that the tippers (Dell & Nvidia insiders) leaked confidential information to the defendants, two hedge fund managers named Newman and Chiasson.<p>I don't see why it's material whether this reason was friendship/status-boosting or some sort of tangible, cash benefit. The hedge fund managers benefited a great deal from the information, and thus the tippers benefited by extension as they now had stronger ties to two successful hedge fund managers.<p>If the tippers benefited from leaking confidential information, they breached a fiduciary contract with their shareholders by using company property (information) for their own gain.
I took some time a while back to look into why insider trading is considered bad. The situation turned out to be messy and undecided but interesting. Here's some links I came across in that search if you're curious.<p>[0] <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=132529" rel="nofollow">http://papers.ssrn.com/sol3/papers.cfm?abstract_id=132529</a>
[1] <a href="http://www.cato.org/publications/commentary/whats-wrong-about-insider-trading" rel="nofollow">http://www.cato.org/publications/commentary/whats-wrong-abou...</a>
[2] <a href="http://dealbreaker.com/2012/07/everything-bad-is-insider-trading/" rel="nofollow">http://dealbreaker.com/2012/07/everything-bad-is-insider-tra...</a>
[3] <a href="http://www.forbes.com/columnists/free_forbes/2003/0512/050.html" rel="nofollow">http://www.forbes.com/columnists/free_forbes/2003/0512/050.h...</a>
This is interesting, I was under the impression that insider trading covered even things accidentally leaked from companies. Is that not the case? If someone used information hacked or found by another person would that fall under insider trading?
"The attorney, as an outsider to the corporation, owes no fiduciary duty to the corporation’s shareholders so the classical theory would not apply. Under the misappropriation theory, the trade is unlawful because the attorney violated a duty to the client by using the client’s confidential information for the attorney’s own benefit."<p>The client is the corporation's shareholders, as management simply acts as an agent for those shareholders.