Insider Trading Rule Covers Unregistered Stocks: 2nd Circ.

Law360, New York (January 27, 2014, 3:18 PM EST) -- The Second Circuit affirmed Monday that corporate insiders have a duty based on federal law to refrain from trading on material, nonpublic information about their company even if the securities are not registered with federal regulators.

The appellate court’s decision revived a former shareholder’s securities claims alleging executives of Xcelera Inc., a computer and software company that collapsed following the dotcom bubble, purchased Xcelera stock through a shell corporation without first disclosing any information about the company’s financial state.

“Defendants had no general affirmative duty to...
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