It’s been nearly 20 years since the names Milken and Boesky dominated the financial headlines with accounts of insider trading and a corrupt fictional character named Gordon Gekko rallied shareholders with the cry of “Greed is Good.” Milken and Boesky lost millions and went to prison and even Gekko suffered a tragic downfall at the movie’s end. These names became synonymous with corporate greed and their downfalls were a cautionary tale for young professionals on the evils of insider trading. Consequently, anyone who lived through those times, especially lawyers, would think that history has proved that the risks of engaging in insider trading far outweighed the rewards, but sadly insider trading again seems on the rise. Sadder still, is the fact that a significant number of the cases brought this year involve alleged misconduct by attorneys.
Insider trading liability revolves around two primary theories of liability: The Classic Theory and the Misappropriation Theory. The Classic Theory involves corporate insiders who knowingly trade in company stock on the basis of material nonpublic information, as well as corporate insiders who have tipped others who traded on this information.
