The law of tipping was the product of the Supreme Court's decision in Dirks v. SEC, (53) announced three years after Chiarella.
(13.) See Hilary Harp, Outsider Trading After Dirks v. Sec, 18 Ga.
these facts were within the "heartland" of the Dirks v. SEC
Following Cady, Roberts, courts have continued to distill the term "personal benefit," perhaps most notably in the landmark case Dirks v. SEC
. (33) In Dirks, the Supreme Court held that "the initial inquiry is whether there has been a breach of duty by the insider," which "requires courts to focus on objective criteria, i.e., whether the insider receives a direct or indirect personal benefit from the disclosure, such as pecuniary gain or a reputational benefit that will translate into future earnings." (34) Because Dirks was essentially a whistleblower to a massive fraud, however, the Court had difficulty applying this framework to him.
This decision is consistent with the Court's earlier decision, Dirks v. SEC
, wherein the Court established the "personal benefit" requirement for Rule 10b-5 insider trading violations.
In fact, in a 1983 decision known as Dirks v. SEC
, the U.S.
United States(26) and Dirks v. SEC;(27) and (3) the years since the Chiarella and Dirks decisions.
UNITED STATE SAND DIRKS V. SEC: THE FIDUCIARY DUTY PRINCIPLE
The current state of traditional insider trading theory is demarcated by the holdings in Chiarella and Dirks v. SEC
.(252) Dirks reaffirmed the Chiarella holding, which limited the scope of Rule 10b-5 to instances involving the breach of a fiduciary duty or other special relationship of trust and confidence, and then defined those situations in which Rule 10b-5 would encompass trades by tippees of Chiarella-type holders of material nonpublic information.
These problems became apparent in Dirks v. SEC
(20) and United States v.
Question 1 in the petition reads in full: "[d]oes the personal benefit to the insider that is necessary to establish insider trading under Dirks v. SEC
, 463 U.S.
In Dirks v. SEC
(1) the United States Supreme Court appeared to recognize the legality of the mosaic theory of securities analysis, in which analysts obtain fragments of information from company insiders and then utilize those fragments to create a mosaic of information used to value the company's worth.