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Texas District Court Dismisses Insider Trading Charges against Mark Cuban and Holds That Misappropriation Theory Requires Duty Not to Trade


by Arthur H. Aufses View Biography
Abbe L. Dienstag View Biography
David S. Frankel View Biography
Alan R. Friedman View Biography
Darren LaVerne View Biography
Kramer Levin Naftalis & Frankel LLP View Firm Credentials
New York Office

August 25, 2009

Previously published on August 2009

On July 17, 2009, in a significant defeat for the Securities and Exchange Commission, Northern District of Texas Chief District Judge Sidney Fitzwater dismissed the high-profile insider-trading charges that the SEC had brought against well-known entrepreneur Mark Cuban. In a 35-page opinion, Judge Fitzwater set forth a comprehensive analysis of the so-called "misappropriation theory" of insider trading, a theory first recognized by the Supreme Court in United States v. O'Hagan as a basis for liability under the anti-fraud provisions of Section 10(b) of the Securities Exchange Act. Judge Fitzwater's decision, which gave the SEC thirty days to file an amended complaint consistent with his ruling, marks a setback for the SEC in a case that has attracted substantial media coverage.


 

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