Legal Case Study: Darla V.

You usually need to have a relationship with the company that requires you to keep info confidential. So if I am a board member giving people confidential information, I am liable. Darla does not have a relationship with Cardware that requires her not to trade on insider information. Darla is not employed by Cardware, and she did not steal the information, so it would be difficult to charge her with "misappropriation." There is also another test under the insider trading law. Darla did not pay anybody for the information, which also helps her case. Recent insider trading case law says that the "tipper" (person giving out confidential information) has to receive compensation for that tip. So it adds another more stringent requirement for insider trading to be prosecuted. I would say that the SEC would have a hard time winning a case against Darla. She did not have a confidential duty to the company, she didn't steal the information, and she didn't pay anybody for the information. In fact, Phil Mickelson the golfer was just in a similar situation. He received confidential …show more content…
I'm going to jail or getting fined. I don't think the Tipper/Tippee theory can apply to Darla. There is not a breach of duty and there is no exchange of personal benefit for her to get the information. I don't think she is liable. The key is that she does not have a confidentiality duty to the company. Darla doesn't steal the information. She just overhears it, she can't help it, and so she doesn't misappropriate it. She doesn't bribe anybody for the information. I don't think either theory would apply to make her liable. You stated that she traded on it for personal gain. You mention two cornerstones of misappropriation theory. That is a good thing about your whole answer actually. You also specifically mention the tests that the two theories must