By Matthew Graves, Jon Haray, and Kara Thomas Beck, DLA Piper
Companies have a vested interest in ensuring that their employees, contractors, vendors, and attorneys are not perceived as "gifting" inside information to tippees.
A spate of recent, high-profile insider trading prosecutions and SEC actions remind that the threat that individuals will trade upon material, non-public information extends well beyond a company’s employees. Unfortunately for those caught up in these investigations, prosecutors and regulators have ways of identifying non-employees who trade on non-public information. And both the Supreme Court and the Second Circuit have recently reaffirmed that non-employees can be criminally liable for distributing or using this information and that employees can be criminally liable for passing material non-public information, if they expected the recipient of the information to trade on it. Companies should craft a compliance policy that both ensures contractors and other third parties appreciate their obligations to safeguard information and provides employees with cautionary tales of what can happen if they disclose material nonpublic information to family and friends.
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