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Can Disclosure Set You Free?

The misappropriation theory of insider trading, which was first recognized by the Supreme Court in <i>United States v. O'Hagan</i>, 521 U.S. 642 (1997), establishes liability for individuals who are not typical 'insiders' of companies and also appears to offer such defendants a specific defense to insider trading charges. The O'Hagan Court based the misappropriation theory on a duty owed by the defendant to the source of non-public material information, rather than to the shareholders of the company whose stock was being traded. Because a defendant prosecuted under the misappropriation theory had a duty only to his source, the Court explained that a defendant's disclosure to the source of information prior to trading or tipping could neutralize the acts of deception necessary for a securities fraud claim.

17 minute readMarch 26, 2007 at 10:53 AM
By
Jeremy Freeman
Can Disclosure Set You Free?

The misappropriation theory of insider trading, which was first recognized by the Supreme Court in United States v. O'Hagan

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