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Stock Trading by Insider in Possession of Inside Information Not Per Se Illegal
Description Appeals court held that it is for the jury to determine if there was causation when insiders base stock trades upon material, nonpublic information.
Topic Securities Law
Key Words Insider Trading, Material Information
C A S E   S U M M A R Y
Facts The SEC sued executives of a computer firm and some of their business associates for insider trading based on material nonpublic information about the firm concerning a forthcoming large order that would greatly affect the firm's stock price.
Decision The appeals court held, in a case of first impression, that mere knowing possession of material nonpublic information while trading is not a per se violation of insider trading laws. There was a material issue of fact to be determined by a jury as to whether the investors used nonpublic information. The court noted that possession of such information creates a "strong inference" that the information was used in the trading, but the causal connection must be shown.
Citation Securities and Exchange Comm. v. Adler, 1998 WL 138770 (11th Cir.)
137 F.3d 1325 (11th Cir., 1998)

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