Judge John Walker
Steginsky held 100,010 shares in Connecticut-based Xcelera Inc., controlled by the Vik defendants. In 2004 Xcelera’s share price on the American Stock Exchange (ASE) tumbled to $1. After the ASE delisted Xcelera stock because the Vik defendants refused to make required SEC filings, the price fell to 25 cents. In 2006 the SEC revoked registration of all Xcelera securities. Xcelera’s investors were then told they could sell their shares back to Xcelera for 25 cents per share. Maltese shell corporation OFC Ltd.—created by the Vik defendants in 2010—then made a tender offer for Xcelera stock. In April 2011 Steginsky sold her shares to OFC. District court dismissed Steginsky’s securities fraud action alleging that insiders bought Xcelera shares by making a tender offer through a shell corporation without disclosing information about Xcelera’s financial state. Second Circuit vacated only the dismissal of Steginsky’s insider trading claims under Securities Exchange Act (SEA) §§10(b), 20(a) and 20A(a). The duty of corporate insiders to either disclose material nonpublic information or abstain from trading is defined by federal common law and applies to unregistered securities. Thus, district court erred in dismissing Steginsky’s insider trading claims.