Whistleblower He then balances these risks against the apparent opportunities for capital gains and makes his decision accordingly. Indeed, the Commission has been charged by Congress with the responsibility of policing all misleading corporate statements from those contained in an initial prospectus to those contained in a notice to stockholders relative to the need or desirability of terminating the existence of a corporation or of merging it with another. 78j(b) and Rule 10b-5, and remand, pursuant to the agreement of all the parties, for a determination of the appropriate remedy. In any event if the Commission feels that its arsenal should be augmented, Congress not the courts is the proper forum for its arguments. There is no proof here that the purchases of the defendants, even if motivated by hopes not then solidly grounded, raised or lowered the market or were manipulative, misleading, deceptive or were accomplished by false or fraudulent devices. When and how are promising results to be disclosed. A corporation may itself violate Rule 10b-5 if it engages in fraudulent activities in connection with a merger or other transaction involving securities. 1964), to include non-reckless negligent misrepresentations or omissions, see Note, 63 Mich.L.Rev. Insiders, as directors or management officers are, of course, by this Rule, precluded from so unfairly dealing, but the Rule is also applicable to one possessing the information who may not be strictly termed an "insider" within the meaning of Sec. Co., 259 F.Supp. The legislative history clearly reveals that the statute was passed to prohibit deceptive and manipulative devices used in connection with securities transactions, and that the "connection" between the complained of conduct and the securities transactions must be a closer one than the majority now sanctions. Turning now to the hypothesis of disclosure: As previously stated, any announcement of the discovery of a remarkable mine would have been both false and misleading. Unfortunately, however, there was no definitive resolution below of Darke's liability in these premises for the trial court held as to him, as it held as to all the other individual defendants, that this "undisclosed information" never became material until April 9. 1968). 7.25). Although the authority for the Rule comes from 10(b) of the Securities and Exchange Act of 1934, the draftsmen turned their backs on the language of that section and borrowed the words of 17 of the Securities Act of 1933, simply broadening these to include frauds on the seller as well as on the buyer. The choice of an ambiguous general statement rather than a summary of the specific facts cannot reasonably be justified by any claimed urgency. ); Thiele v. Shields, 131 F.Supp. However, even if it were not possible to evaluate and transmit current data in time to prepare the release on April 12, it would seem that TGS could have delayed the preparation a bit until an accurate report of a rapidly changing situation was possible. (1934); Comment, 74 Yale L.J. 2d 80 (1965); Esso Standard Oil, S.A. v. S.S. Gasbras Sul, 387 F.2d 573 (2 Cir. The High Powered Committee on Stock Exchange Reforms, 1986 (Ch. ), cert. . [25]Rule 10b-5(2) provides in pertinent part: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, * * *, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, * * *. <em>Texas Gulf Sulphur</em> and the Genesis of Corporate Liability As it is our holding that the information acquired after the drilling of K-55-1 was material, we, on the basis of the findings of direct and circumstantial evidence on the issue that the trial court has already expressed, hold that Darke violated Rule 10b-5 (3) and Section 10(b) by "tipping" and we remand, pursuant to the agreement of the parties, for a determination of the appropriate remedy. Obviously, a subjective approach presents difficulties. Before insiders may act upon material information, such information must have been effectively disclosed in a manner sufficient to insure its availability to the investing public. 1951) is preserved. 9323), the bill a Committee of Conference eventually integrated with a similar Senate bill (S. 3420) to make the bill passed by both Houses of Congress that became the Securities Exchange Act of 1934, the House Committee which reported out H.R. The SEC does not contest the alternative holding below that Holyk and Mollison, not being members of TGS's top management, had no duty of disclosure prior to acceptance of stock options. In a front page article carrying the title "Canada's Copper Rush" the Herald Tribune stated "The biggest ore strike since gold was discovered more than 60 years ago in Canada has stampeded speculators to the snowbound old mining city of Timmins * * *." So recent has been the discovery, and so urgent the effort to accelerate the drill program (four machines have been moved in since the discovery hole was completed), that assays have been completed on only the discovery. Conversely, we are not a jury of nine with no requirement of a unanimous verdict. Legal Depts. These findings are clearly supported by the proof upon which the court relied. Detailed information similar to that required by the 1933 Act has to be filed with the Commission for such registered securities, and this information is required by 13, 15 U.S.C. Several hundred of these were considered worthy of further study and options on the land around them were acquired. 1966); United States v. Schaefer, 299 F.2d 625, 629 (7 Cir. Thus, even if TGS or its insiders had not engaged in securities transactions, if there were evidence from which it could be inferred that the press release was intentionally issued to depress the price of the stock as part of some fraudulent scheme, a 10b-5 violation would have been stated. 2 Less recognized is the opinion's foundational role in Rule 10b 5's use to create a remedy against corporations for misstatements made by their officers (or others) even if the speaker had no evil motive. 1968) (en banc). If, as the majority say, the test of the news release is its impact on the "reasonable" investor (although they indicate that the unreasonable speculator, too, comes under their solicitous wing) to avoid the danger of injunction violation it would be necessary to seek a declaratory judgment from the courts (both trial and appellate because following the majority, Rule 52(a) would no longer apply). To say that the drilling at Timmins had afforded only "preliminary indications that more drilling would be required for proper evaluation of this prospect," was a wholly insufficient statement of what TGS knew. [849] supra at 1463. Who Is Harmed by Insider Trading? - Econlib 258 F.Supp. Factually, the premise posed by the majority is "clearly erroneous."