- Entry
- Reader's guide
- Entries A-Z
- Subject index
Misappropriation Theory
THE MISAPPROPRIATION Theory is associated with insider-trading law. It is not in the statutes, but has evolved through case law since 1981. Until federal securities laws were enacted in the 1930s, it was generally not a crime for officers, directors, or controlling shareholders to trade stock in their own corporations on the basis of inside information. This is still the situation in many other countries; it is considered to be a privilege of corporate status.
Before 1980, insider trading cases were prosecuted using Section 10(b) and Rule 10b-5, which prohibits a corporate insider from buying or selling shares in her own company based on non-public information. This is the basis for the traditional or classic theory of insider trading. The Misappropriation Theory extends insider trading cases ...
- Loading...