Washington
How Chiarella v. United States applies in Washington: state-specific rules, key cases, and bar exam notes for Securities Regulation.
Washington follows the federal standard when assessing insider trading, particularly around materiality and duty of disclosure. Like the federal standard established in Chiarella, Washington courts look at whether insiders have a fiduciary duty to disclose material nonpublic information before trading.
In Washington, insider trading is regulated under the Washington Securities Act (RCW 21.20), which aligns closely with federal laws prohibiting trading based on undisclosed material information and requires a duty of confidentiality or fiduciary relationship for liability to arise.
The court held that breach of fiduciary duty occurs when a corporate officer trades company stock without disclosing material nonpublic information.
This case affirmed that shareholders have a right to know of any material information that might affect their investment decisions.
The court ruled that insiders could not rely on arguments of reliance on public information when they had access to private information relevant to their trading activities.
Washington's approach closely aligns with the federal standard articulated in Chiarella, emphasizing the necessity of a fiduciary duty for liability in insider trading cases. Both Jurisdictions evaluate materiality within the same scope, and violations can lead to both civil penalties and criminal charges.
Understanding the implications of Chiarella is crucial for the Washington bar exam as it relates to insider trading and fiduciary duties outlined under state law.