'Friends And Family' Insider Trading Theory Is Debatable
Law360 (June 30, 2020, 5:40 PM EDT) -- Why are friends and loved ones of corporate insiders still being incarcerated for securities fraud under the "misappropriation theory" of insider trading?
The scenarios are familiar (and especially prevalent in work-from-home environments): A close friend or family member of a corporate insider sees or overhears highly confidential company information, or is entrusted with it by the insider who assumes (and perhaps insists) that it will remain confidential. The friend or family member proves untrustworthy and, without telling the company insider, makes profitable securities trades based on the "misappropriated" information, possibly even "tipping" others who profitably trade.
It is widely accepted that...
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