| 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.)
or 137 F.3d 1325 (11th Cir., 1998) |
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