This month, we discuss Securities and Exchange Commission v. Dorozhko,1 in which the U.S. Court of Appeals for the Second Circuit addressed the question of what constitutes “deceptive” conduct under Section 10(b) of the Securities Exchange Act of 1934. Reversing a lower court order that denied the SEC’s motion for a preliminary injunction, the court held that trades in put options of a company’s stock based on inside information obtained in the absence of a fiduciary relationship with the company may constitute fraud in violation of the federal securities laws.
The opinion, written by Judge Jose A. Cabranes and joined by Judge Peter W. Hall and District Judge Richard J. Sullivan of the U.S. District Court for the Southern District, expands the range of cases that the SEC can bring against defendants in an attempt to curb insider trading.
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