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Contractual Disputes Litigation White Collar Crime

When Is a Promise Enough?: Contractual Duties and Insider Trading

Two criminal appeals before the Second Circuit require the Court of Appeals to decide whether the violation of a fiduciary relationship is required to create insider trading liability or if a breach of contract is sufficient.


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Imagine this: A man takes a job as a security guard for a wealthy executive. His duties include answering phone calls and printing emails containing information about the executive’s company. So he enters into a confidentiality agreement, which prohibits him from disclosing or using such information for matters outside his employment. But one day he sees a confidential email saying the executive’s company is going to be acquired at a premium. He decides to buy stock and call options, all of which he sells at a substantial profit when the information becomes public.

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