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