Brief Fact Summary. The district court found that the defendant failed to attain any revenue from the transactions in questionin a ruling on a Â§ 16(b) complaint.
Synopsis of Rule of Law. With regard to insider trading under Â§ 16(b), a beneficial owner consists of legislative insiders who have an indirect financial interest in the subject securities.
Issue. With regard to insider trading does a beneficial owner consists of legislative insiders who have an indirect financial interest in the subject securities under Â§ 16(b)?
Held. (Winter, C.J.) Yes. The SEC publicized Rule 16a-1 in accordance with its congressionally conferred power to define technical terms and issue rules suitable to execute the Exchange Act. Rule 16a-1(a)(2) defines a beneficial owner as â€œany person who, directly orÂ indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the equity securities.â€ Frost/FNLP had an indirect financial interest in NAVI’s IVAX stock as a result of them sharing indirectly in NAVI’s earnings via a rise in the worth of their NAVI holdings. Reversed.
Discussion. A shareholder is offered a safe harbor under Rule 16a-1, where they are not believed to have a financial interest in a corporation’s portfolio assets. Corporate contacts in portfolio securities are not traceable to the single shareholder under the safe harbor, â€œif the shareholder us not a controlling shareholder of the entity and does not have or share investment control over the entity’s portfolio.â€