We will shortly be exploring this issue in the in banc consideration of Schoenbaum v. However, the ratification is irrelevant here, for we would hold with the district court that a member of top management, as was Kline, is required, before accepting a stock option, to disclose material inside information which, if disclosed, might affect the price of the stock during the period when the accepted option could be exercised. Federal insider trading liability carries with it potentially both civil and criminal liability. In the event that it is found that the statement was misleading to the reasonable investor it will then become necessary to determine whether its issuance resulted from a lack of due diligence. The following case, Texas Gulf Sulphur is an early federal insider trading case.
There cannot be honest markets without honest publicity. A remand on this point is therefore not justified. The Commission should have the authority to deal with new manipulative devices. It is an equally needless exercise to require the district court to determine whether a reasonable investor would have been misled. Furthermore, such a holding might well have the unfortunate result of deterring the dissemination of corporate news despite the strong policy underlying all securities legislation of encouraging disclosure of information useful to present and potential investors.
Consequently, although Clayton is named only as an appellant our decision with respect to the materiality of K-55-1 renders it necessary to treat him also as an appellee. Although, as with the requirement of restitution considered above, the district court had the power to order the cancellation of the option so as to effect the purposes of the Act, we confess our error in instructing the district court without further proceedings there to apply this remedy inasmuch as the question of remedies was not before this court on the prior appeal. Judges Waterman and Anderson, believing that there had been no definitive finding below as to whether Darke, expressly or by implication, transmitted to these outsiders any indication of the extremely favorable results of the drilling operation in which he was engaged, would remand for a determination on this issue, and if it should be determined that Darke did make such revelations, for a determination of the appropriate remedy. Assuming arguendo that the information was material, those not in top management have no duty to disclose to the directors information already reported to their own superiors since they may reasonably assume that the information has been conveyed to the directors on the stock option committee. Such a fact is a material fact and must be effectively disclosed to the investing public prior to the commencement of insider trading in the corporation's securities.
See the table at 258 F. See 3 Loss, Securities Regulation 1975-83 1961. As explained in Western Pacific, § 46 c was merely a ratification of the earlier decision in Textile Mills Securities Corp. I do not think there is any objection to that kind of a clause. Such benefits, in essence, are forms of secret corporate compensation, see Cary, Corporate Standards and Legal Rules, 50 Calif.
They should not be forced, despite an exercise of the best judgment, to act at their peril or refrain in terrorem from acting. Both of these defendants, having inside information as to the results of the Timmins drilling, bought stock within 24 hours before the news of the ore strike was made public. Absent any clear indication of a legislative intention to require a showing of specific fraudulent intent, see Note, 63 Mich. We are satisfied that these purchases in February and March, coupled with his readily inferable and probably reliable, understanding of the highly favorable nature of preliminary operations on the Kidd segment, demonstrate that Huntington possessed material inside information such as to make his purchase violative of the Rule and the Act. See the discussion in footnotes 20, 21, and 22, supra, and in the accompanying text, dispensing with a fraudulent intent requirement in actions based on clause 3 of Rule 10b-5. This seems to me easier on the facts but harder on the law than it does to the majority. Despite the tug of conflicting interests and the influence of popular groups, responsible officials of the leading exchanges have unqualifiedly recognized in theory at least the vital importance of true and accurate corporate reporting as an essential cog in the proper functioning of the public exchanges.
All human perception includes elements of subjective conclusions, and the line between factual and opinion testimony is often undefinable. The attention this case has received from the profession and our in banc consideration make it incumbent on us to give the district courts in our circuit as much guidance as we can. In such cases, especially where there is no jury, the admission of this kind of testimony lies quite properly within the discretion of the trial court. However, as the New York Court of Appeals in Diamond v. Capital Gains Bureau, 375 U. The attention this case has received from the profession and our in banc consideration make it incumbent on us to give the district courts in our circuit as much guidance as we can.
No reason appears why outside investors, perhaps better acquainted with speculative modes of investment and with, in many cases, perhaps more capital at their disposal for intelligent speculation, would have been less influenced, and would not have been similarly motivated to invest if they had known what the insider investors knew about the K-55-1 discovery. Committee on Admissions and Grievances, 130 U. Under the majority's decision, an insider must perform the uncommon act of refusing such an option, promoting speculation as to the reasons therefor, or accept the option and face possible 10b-5 liability. If there is no such connection, investors are relegated to § 18 or state law to recover their losses and the Commission must use its other remedies, discussed infra. . Manipulation is not one of them. Langevoort, the Thomas Aquinas Reynolds Professor of Law at Georgetown University Law Center.
It would seem, by the same token, that if, to make the pill easier to swallow, he urged the directors to include others lacking the knowledge he possessed, he would be liable for all the resulting damage. § 78u e , a permanent injunction restraining the issuance of any further materially false and misleading publicly distributed informative items. All of these statements were inaccurate and a matter of concern to Fogarty and Stephens. We conclude that Judge Bonsal's findings of fact on this issue, after his careful and pains-taking weighing of the conflicting testimony in the light of our prior opinion, are not clearly erroneous findings, and we hold, with him, that the press release of April 12 was indeed misleading to the reasonable investor. You certainly couldn't compute any tonnage from that single hole, could you? While additional drilling was done on Saturday and Sunday, April 11 and 12, the cores had not been seen by the geologists advising management, and there was no way of communicating with the drill site even if someone had been available there to give a reliable appraisal.