78p(a), requires certain officers, directors and major shareholders to file reports with the Commission and the stock exchanges as to their initial holdings of stock and subsequent changes. ), cert. 182, 98 L.Ed. This core was unusually good in mineral content. 258 F.Supp. The majority argue that when compared with the above provisions the slight change of wording in 10(b) the insertion of the phrase "in connection with [885] * * *" indicates that Congress intended a revolutionary change in the whole thrust of the securities laws. 10261 (1934). TEXAS GULF LOSES BID IN HIGH COURT - The New York Times Thus, the legislative history of Section 10(b) does not support the proposition urged upon us by Texas Gulf Sulphur [860] that Congress intended the limited construction of the "in connection with" phrase applied by the trial court. Further contrast it with a hypothetical November 1963 press release implicitly suggested by the majority "TGS as a result of drilling on its property in Canada has knowledge of the more than marginal possibility of a mine of magnitude over an extensive region of remarkably rich mineralization." 31, 2023 LAW OF CORPORATE MANAGEMENT AND FINANCE LGST 2020 / 8020 Spring 2023 Prof. Vince As of that time SEC experts estimated ore reserves of over 8 million tons at a gross assay value (excluding costs) of over $26 a ton. See also Mutual Shares Corp. v. Genesco, Inc., 384 F.2d 540, 547 (2 Cir. Furthermore, such a holding might well have the unfortunate result of deterring the dissemination of corporate news despite the strong policy underlying all securities legislation of encouraging disclosure of information useful to present and potential investors. 91,317 (N.D.Ill. Nor is it consonant with reality to suggest, as does the majority, that corporate executives may be motivated in accepting employment by the opportunity to make "secret corporate compensation * * * derived at the expense of the uninformed public." The Exchange Act was passed after the 1929 stock market crash with the intent, in part, to restore public trust in the markets. In my opinion the evidence establishes as a matter of law that the press release was misleading. They contend, however, that their purchases were not proscribed purchases for the news had already been effectively disclosed. 301 (S.D.N.Y. Texas Gulf Sulphur Co., a federal circuit court supported the SEC's ruling, stating that anyone who has inside . This requirement, whether it be termed lack of diligence, constructive fraud, or unreasonable or negligent conduct, remains implicit in this standard, a standard that promotes the deterrence objective of the Rule. 275, 11 L.Ed.2d 237 (1963), that the elements of a cause of action for "fraud" vary "with the nature of the relief sought" and that "It is not necessary in a suit for equitable or prophylactic relief to establish all the elements required in a suit for money damages." A remand on this point is therefore not justified. What Just Happened to SEC Insider Trading Disgorgement? - LinkedIn Furthermore, the location of drilling holes is critical in determining continuity. 1961); SEC Sec.Exch.Act Rel. Since only K-55-1 had been drilled at that point, the District Court correctly held that there was no duty of disclosure on the part of those receiving the options. A corporation may itself violate Rule 10b-5 if it engages in fraudulent activities in connection with a merger or other transaction involving securities. The experts which the trial court credited were of the opinion that Kidd 55 was accurately portrayed as a prospect which required further exploration. The requirement that a statement may not be found misleading unless its issuance is actuated by a "wrongful purpose" might well have the effect of permitting the issuers of misleading statements to seek an advantage but to escape liability if the advantage fails to materialize to the degree contemplated, or cannot be demonstrated. 1963) (same); Lorenz v. Watson, 258 F.Supp. Question: Develop the argument that Martha Stewart was not really in possession of inside information that was disclosed in a breach of a fiduciary duty. Yet the requirement of hourly bulletins to the press from the conference room would not be compatible with common [876] sense. This hole was drilled westerly at an angle of 60 and was intended to explore mineralization beneath K-55-1. The majority opinion appears to approve of the Commission's position without reservation. And finally there is the sardonic anomaly that the very members of society which Congress has charged the SEC with protecting, i. e., the stockholders, will be the real victims of its misdirected zeal. Co. v. Linde Air Prods. The broad congressional purpose in passing the Securities Exchange Act of 1934 is set forth by Thomas G. Corcoran, one of the draftsmen of the bill that became the 1934 Act. Several brokers testified that they interpreted the release as affirmative and encouraging. The text of the release and the three point drop in the market price following its issuance in the face of press reports that would normally have led to a large and, as matters developed, justified increase, are sufficient proof of that. It then stated, purporting to give the true facts in contradiction to the rumors: "The facts are as follows." cases. 56-7 (1944); 8 SEC Ann.Rep. Insider trading laws in India - Legal Services India Nor is it any justification that such an explicit disclosure of the truth might have "encouraged the rumor mill which they were seeking to allay." Before LUMBARD, Chief Judge, and WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS, ANDERSON and FEINBERG, Circuit Judges. 26 (S.D. [34] Stephens advised Fogarty [879] that TGS should issue a press release to clarify the rumors that Fogarty therefore contacted Mollison who had just returned from Timmins. Our survey of the facts found below conclusively establishes that knowledge of the results of the discovery hole, K-55-1, would have been important to a reasonable investor and might have affected the price of the stock. (1) In resolving the stock purchase issue, the primary factual inquiry must be concentrated on (a) the nature and extent of the knowledge possessed by, or available to, the purchaser on the date of purchase, and (b) the position of the purchaser in relation to TGS. SEC v Texas Gulf Sulphur - Harvard University Constructive Ambiguity and Judicial Development of Insider Trading - SSRN [30] Though the Board of Directors of TGS ratified the issuance of the options after the Timmins discovery had been fully publicized, it obviously was of the belief that Kline had committed no serious wrong in remaining silent. The attention this case has received from the profession and our in banc consideration make it incumbent on us to give the district courts in our circuit as much guidance as we can. The Commission has carefully defined the scope of sampling required to justify even estimates, as follows: Id., Item 8(A) (c), 1 CCH Fed.Sec.L. The resolution, if such be possible, of the many problems presented in this field should be by rule, as definite as possible, formulated in the light of reality and not retroactive in effect as here. Moreover, a review of other sections of the Act from which Rule 10b-5 seems to have been drawn suggests that the implementation of a standard of conduct that encompasses negligence as well as active fraud comports with the administrative and the legislative purposes underlying the Rule. However, until drilling was resumed, nothing further was learned about the ore content of the property other than as revealed in November and December 1963 from the analysis of K-55-1. [13]The April 16th article in The Northern Miner resulted from the reporter's April 13th visit to the drill site where he interviewed defendants Mollison, Holyk and Darke and looked at records of the drilling to that time. The essence of the Rule is that anyone who, trading for his own account in the securities of a corporation has "access, directly or indirectly, to information intended to be available only for a corporate purpose and not for the personal benefit of anyone" may not take "advantage of such information knowing it is unavailable to those with whom he is dealing," i. e., the investing public. 480, 19 L.Ed.2d 470 (1967); Pappas v. Moss, 393 F.2d 865 (3 Cir. 1978) (affirming first criminal insider trading case conviction), rev'd on other grounds, 445 U.S. 222 (1980). Constructive Ambiguity and Judicial Development of Insider Trading Indeed, any such conclusions from a first drill core, if so announced by TGS, would undoubtedly have had a substantial effect on the market price of TGS stock and would have immediately brought forth both the wrath of, and injunction papers from, the Commission charging TGS with issuing false, misleading and unsupported statements to boost the price of the stock. ); Thiele v. Shields, 131 F.Supp. Obviously, a subjective approach presents difficulties. Business Quiz 5 Flashcards | Quizlet The insiders here were not trading on an equal footing with the outside investors. This requirement is explicit in 10(b) of the Act (15 U.S.C. No clear and present danger, no continuing wrongful acts and no likelihood thereof are to be found in the record before this court. Legal Depts. Absent any clear indication of a legislative intention to require a showing of specific fraudulent intent, see Note, 63 Mich.L.Rev. SEC v. Texas Gulf Sulphur Co. Wikipedia Republished // WIKI 2 But even he did not act on the belief that the second press release had in fact reached the market, see 258 F. Supp. 1967); we should not impose such expansive liability in a situation, markedly different from those considered in the cases just cited, where to do so would frustrate, not further, the larger goals of the securities laws. 168 (1953), that cannot be done without an appreciation of the illegality of the conduct proposed to be excused, cf. 2. What specific features of the information that she obtained make her case different 275, 11 L.Ed.2d 237 (1965); cf. "); Milton Cohen, "Truth in Securities Revisited," 79 Harv. They argue that the "connection" that has to exist between a corporate statement and a security transaction is supplied by the theoretical argument that every "material" corporate statement presumably affects the market price of the issuer's securities. 1962); Kohler v. Kohler Co., 208 F.Supp. 281. 252 F.Supp. See footnote 16, supra. Solved Questions: Could you argue that Martha Stewart did - Chegg 1383, 73rd Cong., 2d Sess. Moreover, noting that the "in connection" clause has been broadly construed, the District Court did not require that stock purchases by TGS or insiders be shown. The District Court found that "TGS had previously drilled 65 equally promising anomalies, but most of them had revealed either barren pyrite or graphite, while a few had shown marginal mineral deposits in insufficient quantities to be commercially mined." Here, a valuable corporate purpose was served by delaying the publication of the K-55-1 discovery. 1962) (lack of diligence is all that is required for conviction in a criminal prosecution for violation of 17(a) of the 1933 Act.). Mollison had been advised by Holyk as to the drilling results up to 7:00 p.m. on April 10th. . It is not altogether certain from the present record that the draftsmen could, as the SEC suggests, have readily obtained current reports of the drilling progress over the weekend of April 10-12, but they certainly should have obtained them if at all possible for them to do so. Securities Act Interpretation Release No. The trial court found that as of 7:00 P.M. on Thursday, April 9, "There was real evidence that a body of commercially mineable ore might exist." Find many great new & used options and get the best deals for Postcard Railroad Train Texas Beaumont TX Gulf Sulphur Company 1970s Chrome at the best online prices at eBay! 1968); see Jennings, Insider Trading in Corporate Securities: A Survey of Hazards and Disclosure Obligations under Rule 10b-5, 62 Nw.U.L.Rev. We do intend to convey, however, that where a corporate purpose is thus served by withholding the news of a material fact, those persons who are thus quite properly true to their corporate trust must not during the period of non-disclosure deal personally in the corporation's securities or give to outsiders confidential information not generally available to all the corporations' stockholders and to the public at large.
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