securities law · claim
Insider trading occurs when individuals with access to confidential information about a company buy or sell its stock based on that information. It is illegal because it undermines investor confidence in the fairness and integrity of the securities markets.
The information involved must be material, meaning it could influence an investor's decision to buy or sell a security.
What to prove: It must be demonstrated that the information was significant enough to affect the market price of the securities.
The information must not be available to the general public, thereby giving the insider an unfair advantage.
What to prove: It needs to be shown that the information was confidential and not disseminated to other investors.
The insider must have a fiduciary duty or be in a relationship of trust and confidence with the source of the information.
What to prove: Evidence must indicate that the insider had a legal obligation to disclose the information or refrain from trading.
The insider must have engaged in a trade of securities based on the material non-public information.
What to prove: It must be proven that the trades were directly influenced by the insider’s possession of the confidential information.
The Securities and Exchange Commission (SEC) bears the burden to prove insider trading violations by a preponderance of evidence.
Focus on the elements of materiality, non-public information, and duty when answering exam questions on insider trading. Consider discussing how these elements interact with current market practices.