texas gulf sulphur insider trading

Defendant Mollison purchased 100 shares on November 15 in his name only and on April 8 100 shares were purchased in the name of Mrs. Mollison. 598 (S.D.N.Y.1966), Howard v. Levine, 262 F.Supp. 1934 Act, 10(b) SEC Rule 10b-5 . LAW OF CORPORATE MANAGEMENT AND FINANCE LGST Legal Studies & Business 78b, see Kohler v. Kohler Co., 319 F.2d 634, 642 (7 Cir. 10261 (1934). Texas Gulf Sulphur was a mother lode of legal issues. The specific SEC allegation in its complaint is that this April 12 press release "* * * was materially false and misleading and was known by certain of defendant Texas Gulf's officers and employees, including defendants Fogarty, Mollison, Holyk, Darke and Clayton, to be materially false and misleading. at 296. The derivation of Rule 10b-5 is peculiar. In the House Committee hearings on the proposed House bill, Thomas G. Corcoran, Counsel with the Reconstruction Finance Corporation and a spokesman for the Roosevelt Administration, described the broad prohibitions contained in 9(c), the section which corresponded to Section 10(b) of S. 3420 and eventually to Section 10(b) of the Act, as follows: "Subsection (c) says, `Thou shalt not devise any other cunning devices' * * *. at 282 (emphasis added). This seems to me easier on the facts but harder on the law than it does to the majority. TSHA | Texasgulf - Handbook of Texas 258 F.Supp. 1965); Ellis v. Carter, 291 F.2d 270 (9 Cir. However, the importance of this case to the corporate and financial community centers around the news release, its timing and its content. Defendants Clayton and Crawford appeal from that part of the decision below which held that they had violated Sec. 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. ); Cooper v. North Jersey Trust Co., 226 F.Supp. There is no indication that Congress intended that the corporations or persons responsible for the issuance of a misleading statement would not violate the section unless they engaged in related securities transactions or otherwise acted with wrongful motives; indeed, the obvious purposes of the Act to protect the investing public and to secure fair dealing in the securities markets would be seriously undermined by applying such a gloss onto the legislative language. But in both cases the courts recognized that further factual and legal development was necessary for the proper resolution of the issue. In re Enron Corporation Securities, Derivative & Erisa Litigation235 F. Supp. Moreover, the formal announcement could not reasonably have been expected to be disseminated by the time of the opening of the exchanges on the morning of April 16, when Crawford must have expected his orders would be executed. 31, 2023 LAW OF CORPORATE MANAGEMENT AND FINANCE LGST 2020 / 8020 Spring 2023 Prof. Vince 78 Cong.Rec. 1437 (1967). What specific features of the information that she obtained make her case different [869] The Supreme Court made this clear beyond peradventure in the leading case of Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 1961); SEC Sec.Exch.Act Rel. 1271, 1289. An official detailed statement, announcing a strike of at least 25 million tons of ore, based on the drilling data set forth above, was read to representatives of American financial media from 10:00 A. M. to 10:10 or 10:15 A. M. on April 16, and appeared over Merrill Lynch's private wire at 10:29 A. M. and, somewhat later than [847] expected, over the Dow Jones ticker tape at 10:54 A. M. Between the time the first press release was issued on April 12 and the dissemination of the TGS official announcement on the morning of April 16, the only defendants before us on appeal who engaged in market activity were Clayton and Crawford and TGS director Coates. THROUGH TEXAS GULF SULPHUR - Duke University However, the "facts" disclosed relative to the Kidd-55 segment were: "Recent drilling on one property near Timmins has led to preliminary indications that more drilling would be required for proper evaluation of this prospect. You can access the new platform at https://opencasebook.org. 1965); Myzel v. Fields, 386 F.2d 718 (8 Cir. [7] The following morning, Sunday, Fogarty again telephoned Mollison, inquiring whether Mollison had any further information and told him to return to Timmins with Holyk, the TGS Chief Geologist, as soon as possible "to move things along." silver. 7852 and H.R. 78u(e), a permanent injunction restraining the issuance of any further materially false and misleading publicly distributed informative items.[26]. The consequences of holding that negligence in the drafting of a press release such as that of April 12, 1964, may impose civil liability on the corporation are frightening. Drilling of the initial hole, K-55-1, at the strongest part of the anomaly was commenced on November 8 and terminated on November 12 at a depth of 655 feet. The remedy of a permanent injunction against the company, its officers and agents, the issuance of which the majority leaves to the discretion of the trial court, would not only be inappropriate but would be destructive of fundamental rights "inappropriate" because based upon one "too-gloomy" press release on April 12, 1964, with no proof of continuing gloominess thereafter. In view of our conclusion as to materiality we hold that Stephens and Fogarty violated the Rule by accepting them. Despite rumors in the Canadian press that TGS had made a major discovery, Lamont had advised Stephens "that TGS should take no action unless the rumors reached the New York press or until TGS had sufficient information available to issue an appropriate press release." See id. at 296 (emphasis supplied) it applied an incorrect legal standard in appraising whether TGS should have issued its April 12 release on the basis of the facts known to its draftsmen at the time of its preparation, 258 F.Supp. 10 (1942). 587, 88 L.Ed. The Second Circuit embraced the SEC's view that this conduct violated Rule 10b-5. 1968). Texas Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir. L.Rev. Thus it is immaterial whether Crawford's orders were executed before or after the announcement was made in Canada (9:40 A.M., April 16) or in the United States (10:00 A.M.) or whether Coates's order was executed before or after the news appeared over the Merrill Lynch (10:29 A.M.) or Dow Jones (10:54 A.M.) wires. . See, e. g., Note, Accountant's Liabilities for False and Misleading Statements, 67 Colum.L.Rev. Instead, the court held that "the issuance of a false and misleading press release may constitute a violation of Section 10(b) and Rule 10b-5 if its purpose is to affect the market price of the company's stock to the advantage of the company or its insiders. The cases to date have involved defendants who if not actually purchasing or selling securities at least participated in a direct manner in a securities fraud. -Schedule & execute hydrocarbon movements effectively to meet demand, inventory & service level targets for refined products, components . These insiders, after learning of an unprecedented discovery . 1967) (Corporation fraudulently arranged a merger so that one class of shareholders would receive much less than the other class which was comprised of officers and directors. at 296. (1934). (10) As to Texas Gulf Sulphur, we reverse the dismissal of the complaint and remand for a further determination by the district judge in the light of the approach taken in this opinion. Our new book, A History of Securities Law in the Supreme Court, explores how the Supreme Court has made (and remade) securities law.It covers the history of the federal securities laws from their inception during the Great Depression, relying on the justices' conference notes, internal memoranda, and correspondence to shed light on how they came to their decisions and drafted their opinions. #2- What is your assessment of the Texas Gulf Sulphur press release of April 12? If press releases have to read like prospectuses to guard against possible 10b-5 liability, it is safe to predict that they will quickly fall out of favor with corporate management. Co. v. Linde Air Prods. No one has asserted, or reasonably could assert, that the purpose for issuing a release was anything but good. at 296, and that the release was not "misleading or deceptive on the basis of the facts then known," 258 F.Supp. David Pajcin Insider Trading Scandal - 2190 Words | Studymode Our decision to expand the limited protection afforded outside investors by the trial court's narrow definition of materiality is not at all shaken by fears that the elimination of insider trading benefits will deplete the ranks of capable corporate managers by taking away an incentive to accept such employment. L.Rev. 77q(a) which is almost word for word the same except for the explicit requirement that any alleged fraud be associated with "the offer or sale of * * * securities." 1962); Dack v. Shanman, 227 F.Supp. Silence, when there is a duty to speak, can itself be a fraud. An even more striking illustration would be found within the structure of a large pharmaceutical company where discoveries of panaceas to cure human disease occupies the workdays of thousands of scientists. 2 Close C5P5 The rapid development of a broad insider trading prohibition under Rule 10b-5 would face a formidable obstacle, however, after Lewis Powell joined the . But such a press release would have been highly misleading since the information necessary to draw such conclusions was not available on April 10 according to the TGS witnesses whom the District Court chose to believe. 1555, 12 L.Ed.2d 423 (1964), violation of Rule 10b-5(2) may not do so under all circumstances, including those presented by the April 12 press release. Visual estimates by Holyk of the core of K-55-1 indicated an average copper content of 1.15% and an average zinc content of 8.64% over a length of 599 feet. H.Rep.No.85, 73dCong., 1st Sess. Most of the footage drilled by April 10 had been in a single plane (2400 S), but by April 15 drilling had established mineralization in a number of additional planes. Texas Gulf Sulphur Co., 401 F. 2d 833 (2d Cir. Insider Trading as Private Corruption - The Harvard Law School Forum on Appellant Crawford, who ordered[17] the purchase of TGS stock shortly before the TGS April 16 official announcement, and defendant Coates, who placed orders with and communicated the news to his broker immediately after the official announcement was read at the TGS-called press conference, concede that they were in possession of material information. 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. at 291. The majority remand the case against the corporate defendant to the district court for a determination as to whether the April 12 press release was misleading and whether, if so, those responsible for the release used due diligence. Insider Trading And its Legal Mechanism in India - Commercial Law 77q(a) "* * * in the [offer or] sale of any securities to obtain money or property by means of * * *"; [language in brackets was added in 1954 amendments]), and with the 1936 antifraud amendment of Section 15 of the Securities Exchange Act of 1934 ( 15(c) (1), 15 U.S.C. (Great American brief, pp. The Moral Problem in Insider Trading - University of Pennsylvania In the field of speculation, it would be interesting to know the position the Commission would have taken if TGS had announced that K-55-1 was "one of the most impressive drill holes completed in modern times" and that it "is just beyond your wildest imagination" (SEC Brief, p. 25). The next morning the 137 foot mark had been reached, fifty feet of which showed mineralization. He is, to the best of his ability, taking calculated risks." See the table at 258 F. Supp. 707 (SD NY 1949), rev'd on other grounds, 188 F.2d 783, 786 (2 Cir. The Commission's whole argument appears to be that the release should have been more optimistic (if conclusions were to be used at all), and that it should have referred to Kidd 55 as having "proven" or "probable" ore. 1964), to include non-reckless negligent misrepresentations or omissions, see Note, 63 Mich.L.Rev. Indeed, the Commission has been charged by Congress with the responsibility of policing all misleading corporate statements from those contained in an initial prospectus to those contained in a notice to stockholders relative to the need or desirability of terminating the existence of a corporation or of merging it with another. (8) As to Darke, as one who passed on information to tippees, we reverse the dismissal of the complaint and remand, pursuant to the agreement by all the parties, for a determination of the appropriate remedy. The trial court also found, 258 F.Supp. The Report of the Senate Committee which presented S. 3420 to the Senate summarized Section 10(b) as follows: Indeed, from its very inception, Section 10(b), and the proposed sections in H.R. SEC v. Texas Gulf Sulphur Co. Wikipedia Republished // WIKI 2 Chiarella v. Such an announcement would, of course, have been of no value to anyone except possibly a few graduates of Institutes of Technology and they, as the expert witnesses here, would have recognized that one drill hole does not reveal a commercially profitable mine. 240.14a-101-103. ); Meisel v. North Jersey Trust Co., 218 F.Supp. Incorrect Mark 0 out of 1. [25]Rule 10b-5(2) provides in pertinent part: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, * * *, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, * * *. On November 12, 1963 drilling of K-55-1 was terminated at 655 feet. Visual estimates of K-55-3 revealed an average mineral content of 1.12% copper and 7.93% zinc over 641 of the hole's 876-foot length. NowThis Originals 2.25M subscribers Subscribe 4K 287K views 7 years ago Subscribe to @NowThisOriginals In this episode , we delve into the complex. 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.

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