Classroom Insiders - How Justice Powell Weakened the SEC’s Control

Thomas Fox - Compliance Evangelist
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In this episode of Classroom Insiders Podcast, Lydia, a 2L at Washington and Lee, a staff writer on Law Review, plans to work at Weil, Gotshal, and Manges this summer in their New York office and hopes to specialize in either corporate or technology, or an intersection of the two discusses how Justice Powell gradually loosened the SEC’s hold on insider trading regulation in this episode of Classroom Insiders.

States regulated insider trading See more +

In this episode of Classroom Insiders Podcast, Lydia, a 2L at Washington and Lee, a staff writer on Law Review, plans to work at Weil, Gotshal, and Manges this summer in their New York office and hopes to specialize in either corporate or technology, or an intersection of the two discusses how Justice Powell gradually loosened the SEC’s hold on insider trading regulation in this episode of Classroom Insiders.

States regulated insider trading until the 1960s when President Kennedy appointed Chairman William Cary of Columbia Law, who wanted the SEC to have broad regulatory powers. Chairman Cary provided a new federal basis for broad enforcement powers of insider trading, which was then adopted by the Second Circuit in the Texas Gulf Sulfur case and birthed the disclose-or-abstain rule. This decision would stand for the next decade as the preeminent insider trading rule until Chiarella and Justice Powell.

Justice Powell chipped away at the SEC’s regulatory overreach case by case, starting with Chiarella v. SEC. He introduced the fiduciary relationship element to the disclose-or-abstain rule, and then Dirks v. SEC, credited for adding a personal benefit element to the tipper-tippee rule. The majority opinion written by Justice Powell established a personal benefit test, which requires courts to determine whether an insider tipper personally benefits indirectly or directly from disclosure. Three examples of personal benefits are pecuniary gain, reputation gain, and a presumption of benefit from close friend or family member relationships.

Tune in to Compliance Podcast Network to learn more on why Justice Powell gradually loosened the SEC’s hold on insider trading regulation in Classroom Insiders Podcast. #ClassroomInsiders #Podcast #JusticePowell #SEC #CPN See less -

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