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.
No showing of actual misuse of inside information or of unlawful intent is necessary to compel disgorgement.View Full Point of Law
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€