Identifying Involved Parties
Chapters in this video
- 0:00 The domino effect of insider trading liability
- 1:21 Insiders and the 10% ownership threshold
- 2:10 Tippers and the personal benefit test
- 2:37 Tippees, the no-trade-safe rule, and objective standards
- 4:26 Controlling persons and failure-to-prevent liability
- 5:15 Information barriers between banking and trading
- 5:52 Rapid-fire exam recap
What this video covers
- Why the 10% ownership threshold automatically saddles an investor with insider status and strict fiduciary duty, even without being an officer or director
- How a tipper becomes liable without ever trading, provided they received a personal benefit and the tippee acted on the information
- Why a tippee who merely receives material nonpublic information (MNPI) but never trades faces no liability, while a controlling person who never trades can still be liable
- What the objective should-have-known test means for a tippee, and why claiming naivety does not defeat liability when context puts any reasonable person on notice
- How controlling person liability arises from failing to maintain adequate procedures, not from personal trading
- What information barriers (ethical walls) do, and why investment banking must be separated from trading and sales departments
- The full domino chain of liability from insider leak through tipper share to tippee trade, including the controlling person who failed to stop the fall
Read the full lesson, free
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