Thursday, November 7, 2013

Dirks v. SEC case brief

Dirks v. SEC case brief summary
463 U.S. 646 (1983)

Petitioner sought review of the judgment of the United States Court of Appeals for the District of Columbia Circuit holding in favor of respondent, Securities and Exchange Commission, in respondent's suit against petitioner for violations of § 17(a) of the Securities Act of 1933, 15 U.S.C.S. § 77q(a), 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j(b), and 17 C.F.R. § 240.10b-5.

Petitioner was an officer of a broker-dealer firm and specialized in investment analysis of insurance company securities to investors. Petitioner received information that a corporation had vastly overstated assets. Petitioner discussed this information with clients, and some of those clients sold holdings in the corporation. When respondent learned of petitioner's actions, respondent found that petitioner aided and abetted violations of § 17(a) of the Securities Act of 1933, 15 U.S.C.S. § 77q(a), and § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j(b), by repeating the allegations to members of the investment community. In a divided opinion, the appellate court found against petitioner and he sought the Court's review.


  • The U.S. Supreme Court held there was no actionable insider-trading violation by petitioner where petitioner was a stranger to the corporation, had no fiduciary duty to corporation's shareholders, did not try to gain corporate shareholder's confidence, and did not illegally obtain the information about the corporation. 
  • Therefore, petitioner had no duty to abstain from the use of the inside information, and the lower court's judgment was reversed.


A judgment in favor of respondent was reversed where petitioner did not have a duty to refrain from the use of the inside information at issue.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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