texas gulf sulphur insider trading

1934 Act, 10(b) SEC Rule 10b-5 . Id. Counsel, Ofc. 1961). 1967); we should not impose such expansive liability in a situation, markedly different from those considered in the cases just cited, where to do so would frustrate, not further, the larger goals of the securities laws. . See SEC v. Electrogen Industries, Inc., 68 Civ. Meanwhile, rumors that a major ore strike was in the making had been circulating throughout Canada. But vulnerable as the news release may be, what of the many daily developments in the Research and Development departments of giant corporations. One area, called Kidd 55, was deemed promising by the survey, and a hole was drilled with the resulting core analyzed. By the evening of April 10 in this hole, too, substantial copper mineralization had been encountered over the last 42 feet of its 97-foot length. 1964),[29] that if a corporate officer having such knowledge persuaded an unknowing board of directors to grant him an option at a price approximating the current market, the option would be rescindable in an action under Rule 10b-5. Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 1962) (lack of diligence is all that is required for conviction in a criminal prosecution for violation of 17(a) of the 1933 Act.). List v. Fashion Park, Inc., supra at 462, quoting from Kohler v. Kohler Co., 319 F.2d 634, 642, 7 A.L.R.3d 486 (7 Cir. The majority argue that when compared with the above provisions the slight change of wording in 10(b) the insertion of the phrase "in connection with [885] * * *" indicates that Congress intended a revolutionary change in the whole thrust of the securities laws. Rule 10b-5 remains a potent method of proceeding against fraudulent schemes which involve securities transactions for both the Commission and private investors. Before further discussing this matter it seems desirable to state exactly what the SEC claimed in its complaint and what it seeks. The majority state that the K-55-1 drilling results were material because they "might well have affected the price of TGS stock." ", For the defendants, Dean Forrester, Dean of the College of Mines of the University of Arizona and Director of the Arizona Bureau of Mines, said that "one hole is evidence of what you encounter only in that hole" and that even after K-55-3 was drilled in April 1964, it was "much more likely that the materials exposed in those two holes will extend for, let's say two feet outside the limits of the hole than it is likely that it will extend 25 feet or that it will extend 50 feet. Insider Trading Regulations: A Story of Compliance and Profit [Expert There can be little doubt but that those familiar with the results of K-55-1 were influenced thereby in making their purchases. 321, 322-325 (S.D.N.Y.1965) (Wyatt, J. During the course of that project, the courts developed a complex, fraud-based approach to determining the scope of liability. ); Glickman v. Schweickart & Co., 242 F.Supp. (1934); S. Rep.No.1455, 73rd Cong., 2d Sess. 321 (SDNY 1965); Thiele v. Shields, 131 F.Supp. [37] Hearings before the House Committee on Interstate and Foreign Commerce on H.R. SEC v. Texas Gulf Sulphur Co. Wikipedia Republished // WIKI 2 [38] Thus one who conspires with or aids and abets another in the [887] fraudulent purchase or sale of securities may have the needed connection. Although the authority for the Rule comes from 10(b) of the Securities and Exchange Act of 1934, the draftsmen turned their backs on the language of that section and borrowed the words of 17 of the Securities Act of 1933, simply broadening these to include frauds on the seller as well as on the buyer. Free shipping for many products! 1963); Note, 32 U.Chi. The Commission in that case also stated two truisms (1) that "it is extremely important that all facts relevant to an estimate of the value of such property be disclosed," and (2) that "the judgment of the `value' of this property is dependent upon the results of exploratory work * * *." See Baranow v. Gibralter Factors Corp., 366 F.2d 584, 587-589 (2 Cir. Jan. 24, 1968); Howard v. Levine, 262 F.Supp. The Wild World Of Biotech Insider Trading | Seeking Alpha 78b, see Kohler v. Kohler Co., 319 F.2d 634, 642 (7 Cir. As to Stephens and Fogarty, the majority decision places insider recipients of stock options in a difficult dilemma. Under such circumstances, the most effective procedure is the quick and speedy denial of such rumors through a release to the public Press * * *". If the SEC had appealed the ruling dismissing this portion of the complaint as to Holyk and Mollison, I would have upheld the dismissal quite apart from the special circumstance that a refusal on their part could well have broken the wall of secrecy it was important for TGS to preserve. This means you can view content but cannot create content. The Wild World of Biotech Insider Trading - Medium Freed v. Szabo Food Serv., Inc., CCH Fed. 598 (S.D.N.Y.1966), Howard v. Levine, 262 F.Supp. What's Insider Trading? These insiders, after learning of an unprecedented discovery . (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. Non-management directors would not normally challenge a recommendation for postponement of an option plan from the President, the Executive Vice President, and the Vice President and General Counsel. For example, the company had spent some $7,000,000 to purchase an underwater dome off the coast of Texas and an additional $1,000,000 to drill 21 holes before concluding that there was not enough sulphur in the dome to be of commercial interest. 2d 549 (S.D. A. PR. Coates, however, placed his call no later than 10:20. supra, at 1366, he said: The majority opinion must also be considered in light of its overall impact before a decision can be reached as to its advisability (assuming that the power to interpret 10(b) is as unlimited as the majority apparently believe). LAW OF CORPORATE MANAGEMENT AND FINANCE LGST Legal Studies & Business As we stated in List v. Fashion Park, Inc., 340 F.2d 457, 462, "The basic test of materiality * * * is whether a reasonable man would attach importance * * * in determining his choice of action in the transaction in question. at 287, is well documented by the record. After all, TGS had prior experience in exploration where initially promising situations turned out to be "duds." Texas Gulf Sulphur Co. 1967. Therefore, the statements in the legislative history applicable to the reporting and disclosure provisions have no bearing on the correct interpretation of 10 (b). If, as the majority say, the test of the news release is its impact on the "reasonable" investor (although they indicate that the unreasonable speculator, too, comes under their solicitous wing) to avoid the danger of injunction violation it would be necessary to seek a declaratory judgment from the courts (both trial and appellate because following the majority, Rule 52(a) would no longer apply). [38] In two cases, on motions to dismiss, two courts have permitted 10b-5 actions to continue where defendants were not alleged to be intimately connected with a purchase or sale of securities. Incorrect Mark 0 out of 1. ); Cooper v. North Jersey Trust Co., 226 F.Supp. [15] Inasmuch as the visual evaluation of that drill core (a generally reliable estimate though less accurate than a chemical assay) constituted material information, those advised of the results of the visual evaluation as well as those informed of the chemical assay traded in violation of law. 2002) [2002 BL 100] . We hold only that, in an action for injunctive relief, the district court has the discretionary power under Rule 10b-5 and Section 10(b) to issue an injunction, if the misleading statement resulted from a lack of due diligence on the part of TGS. During the period of drilling in Timmins, the market price of TGS stock fluctuated but steadily gained overall. Texas Gulf Sulphur Co. Brian JM Quinn. Section 78j(b), and Rule 10b-5 (17 CFR 240.10b-5) (the Rule), promulgated thereunder, and to compel the rescission by the individual defendants of securities transactions assertedly conducted contrary to law. This paper includes a comparative overview of the difference between India's Insider trading laws and the U.S.'s Insider trading laws. See S.Rep.No.792, 73rd Cong., 2d Sess. Section 12 of the Act, 15 U.S.C. Albert R. Connelly, Donald I. Strauber, Cravath, Swaine & Moore, New York City, for Coates. Indeed, even the abbreviated version of the release reported by Merrill Lynch over its private wire did not appear until 10:29. To encourage compliance with these disclosure and reporting requirements, Congress enacted civil ( 18, 15 U.S.C. v. Texas Gulf Sulphur became the first insider trading case to be litigated in federal courts in American history, making the beginning of disgorgement in S.E.C. In these particulars we have followed the lead of the court below. Such a deceptive or manipulative practice would be prohibited by 10(b) and Rule 10b-5. With the aid of one Carroll, a public relations consultant, Fogarty drafted a press release designed to quell the rumors, which release, after having been channeled through Stephens and Huntington, a TGS attorney, was issued at 3:00 P. M. on Sunday, April 12, and which appeared in the morning newspapers of general circulation on Monday, April 13. Chiarella v. (5) As to Kline, as a recipient of a stock option, we reverse the dismissal of the complaint and remand with directions to issue an order rescinding the option and for a determination of any other appropriate remedy in connection therewith. 99 (S.D.N.Y.1966), appeal pending; Heit v. Weitzen, 260 F.Supp. While the alleged fraudulent acts were committed before plaintiff sold his stock (he had not at the time of suit), he was about to be forced to sell his part of a single fraudulent scheme.). Disgorgement in Insider Trading Cases: FY2005-FY2015 - SMU The approach has led, in many cases, to doctrinal uncertainty, a result that is reflected in the recent . at 282. The majority disagree as to Kline, placing him in top management along with Stephens and Fogarty, and holding that he had sufficient knowledge that his non-disclosure violated Rule 10b-5. They call it "a major factor in determining whether the K-55-1 discovery was a material fact" and say that this "virtually compels the inference that the insiders were influenced by the drilling results." 78i provides that it shall be unlawful for any broker, dealer or other person to create a false or misleading appearance of activity in the market for a stock or to attempt to affect the price of a stock by certain specific manipulative devices. Texas Gulf Sulphur is mostly known today for transforming insider trading law, but the judges of the Second Circuit hearing that case struggled more with the question of corporate liability. In 1968, Securities and Exchange Commission v. Texas Gulf Sulphur Co. implicated the employees of a Texas mining company and was the first famous case example of _____. at 843-47. 91,317 (N.D.Ill.1964); Stockwell v. Reynolds & Co., 252 F.Supp. 33 (E.D.Pa.1964); Fischer v. Kletz, 266 F. Supp. THROUGH TEXAS GULF SULPHUR - Duke University David Pajcin Insider Trading Scandal - 2190 Words | Studymode Crawford points to the scattered rumors of the discovery which had been circulating for some time before April 15, to the release of the information to The Northern Miner on April 15 to be published by it on the 16th, to the arrangement made by TGS with the Ontario Minister of Mines for the release of an abbreviated report on the evening of the 15th (which did not eventuate until 9:40 A.M., April 16), and to the corporation's official announcement at 10:00 A.M. on the 16th, all of which transpired prior to an anticipated execution of his purchase orders that had been placed by him after trading had closed on the Midwest Exchange on April 15. Corp., supra, 188 F.2d at 786, and follow the lead of those Circuits that seem to have discarded the scienter requirement in actions for damages under Rule 10b-5,[32] Ellis v. Carter, 291 F.2d 270, 274 (9 Cir. But in both cases the courts recognized that further factual and legal development was necessary for the proper resolution of the issue. This Day In Market History: Texas Gulf Sulphur Company's Mineral Strike . The District Court correctly found that "the issuance of the release produced no unusual market action." Counsel, Donald M. Feuerstein, Atty., SEC, for Securities and Exchange Commission. Query, as to whether twelve witnesses (akin to a jury) should be required and would a seven-to-five count be acceptable or would ten-to-two more accurately reflect public opinion? Although the problem of insider trading is not new, in recent years the extent of We do not believe that Congress intended that the proscriptions of the Act would not be violated unless the makers of a misleading statement also participated in pertinent securities transactions in connection therewith, or unless it could be shown that the issuance of the statement was motivated by a plan to benefit the corporation or themselves at the expense of a duped investing public. The price went up and the shareholders were impressed with this indication of the opinion of the financial community as to the proposed merger. 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. 3230 (May 21, 1942); 10 SEC Ann.Rep. 1978) (affirming first criminal insider trading case conviction), rev'd on other grounds, 445 U.S. 222 (1980). A offerings under the 1933 Act): Item 8(A) (b), 1 CCH Fed.Sec.L.Rep. The court [US Court of Appeals for the Second Circuit] contended that the federal insider trading prohibition was intended to assure that 'all investors trading on impersonal exchanges have relatively equal access to material information.' See Berko v. SEC, 316 F.2d 137, 141-142 (2 Cir. Insider Trading | A History of Securities Law in the Supreme Court Clayton, who was unaware of the April 16 disclosure announcement TGS was to make can, in support of his claim that the favorable news was public, rely only on the rumors and on the phone calls received by TGS prior to the placing of his order from those who seemed to have heard some version or rumors of the news. [881] The District Court aptly pointed out that in quelling the rumors TGS had to proceed with caution: While it thus might have been "safer" for TGS to have issued a sheaf of drilling results and mineral analyses (which the press would probably have declined to print), "they would have [thereby] encouraged the rumor mill which they were seeking to allay." The case offers a common insider-trading fact pattern: after a mining company discovered promising mineral depositsbut before it announced the discoveryseveral insiders bought the company's shares and options to acquire its shares. This seems to me easier on the facts but harder on the law than it does to the majority. By 7:00 p.m., April 10, the following data was available: The Commission's experts testified that because copper and zinc had been found in these five holes (although in varying percentages) it could reasonably be concluded that the mineralization was continuous between holes 400 feet apart and also 100 feet byond in each direction and to a depth of 600 feet, one hundred feet below the deepest hole. Foreign Corrupt Practices Act In 1968, Securities and Exchange Commission v. Texas Gulf Sulphur Co. implicated the employees of a Texas mining company and was the first famous case example of ________. Particularly here, where a formal announcement to the entire financial news media had been promised in a prior official release known to the media, all insider activity must await dissemination of the promised official announcement. 3230 (May 21, 1942) ("The new rule closes a loophole in the protection against fraud administered by the Commission by prohibiting individuals or companies from buying securities if they engage in fraud in their purchase. [8]15 U.S.C. A similar standard has been adopted in private actions, see, e. g., Stevens v. Vowell, 343 F.2d 374 (10 Cir. Wanting the knowledge requisite to making our own appraisal of the significance of the core, we must depend upon the experts. See 258 F.Supp. Texas Gulf Sulphur Co.[6], a federal circuit court stated that anyone in possession of inside . 1070, 1075, 1076 n.29 (1965), the securities laws should be interpreted as an expansion of the common law[21] both to effectuate the broad remedial design of Congress, see SEC v. Capital Gains Research Bureau, supra, 375 U.S. at 195, 84 S.Ct. US 11th Circuit Opinions and Cases | FindLaw Mollison left for New York that evening, arriving on Saturday morning. A remand on this point is therefore not justified. 78j(b). 1968), where corporate insiders bought stock BEFORE the company announced the discovery of the largest silver ore deposit in North America. 587, 88 L.Ed. The first five paragraphs read as follows: Should Make Substantial Open Pit Operation, TEXAS GULF SULPHUR COMES UP WITH A "MAJOR", See Big Tonnages Of Base Metals, Plus Silver. (1) In resolving the stock purchase issue, the primary factual inquiry must be concentrated on (a) the nature and extent of the knowledge possessed by, or available to, the purchaser on the date of purchase, and (b) the position of the purchaser in relation to TGS. Assuming that the contents of the official release could instantaneously be acted upon,[18] at the minimum Coates should have waited until the news could reasonably have been expected to appear over the media of widest circulation, the Dow Jones broad tape, rather than hastening to insure an advantage to himself and his broker son-in-law.[19]. Beyond this, a rule imposing civil liability in such cases would work directly counter to what the SEC has properly called "a commendable and growing recognition on the part of industry and the investment community of the importance of informing security holders and the public generally with respect to important business and financial developments." If they are not disclosed, the corporation is concealing information; [889] if disclosed and hoped-for results do not materialize, there will always be those with the advantage of hindsight to brand them as false or misleading. 1097 (1950): No more is it for this court to make an independent essay of the evidence or of the core. cases. 1961). On April 8 TGS began with a second drill rig to drill another hole, K-55-6, 300 feet easterly of K-55-1. Here, a valuable corporate purpose was served by delaying the publication of the K-55-1 discovery. And there are impressive, strong sections within this width which in themselves are quite spectacular. 1070, 1079-81 (1965). The majority suggest with, in my opinion, most remarkable business naivete that, instead of the April 12, 1964 press release which the trial court had found as a matter of fact had been issued in the exercise of "reasonable business judgment under the circumstances," in their 1968 judgment "it would have obviously been better to have specifically described the known drilling progress as of April 10th by stating the basic facts." In "Truth in Securities Revisited," op. On Saturday morning, April 11th, both the New York Herald Tribune and the New York Times prominently reported a major ore discovery. 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. See Stockwell v. Reynolds & Co., 252 F.Supp. silver. Such benefits, in essence, are forms of secret corporate compensation, see Cary, Corporate Standards and Legal Rules, 50 Calif.L.Rev. See also 9(a) (4), 15(c) (1), (2), 15 U.S. C. 78i(a) (4); 78o(c) (1), (2). Legal Depts. TGS could have announced by November 15, 1963 that it had completed a first exploratory hole, the core of which by visual examination revealed over a length of 599 of 655 feet drilled, an average copper content of 1.15%, zinc 8.64% or, had TGS waited until mid-December, by chemical analysis 1.18% copper, 8.26% zinc and 2.94% ounces of silver per ton; that TGS would try to acquire the other three-quarters of the segment unless the announcement boosted prices to unwarranted heights; that if the property could be acquired further exploratory holes would be drilled to ascertain the nature and extent, if any, of the ore body; that reports of developments would be made from time to time but that the SEC had indicated that TGS should advise its stockholders and the public that there was no proof as yet that a body of commercial ore exists on the property. But this must be recorded as one of the most impressive drill holes completed in modern times. Find many great new & used options and get the best deals for Postcard Railroad Train Texas Beaumont TX Gulf Sulphur Company 1970s Chrome at the best online prices at eBay! Id. 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.

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