Meaning of Generally Disclosed (Defence) – Securities Regulation

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You can grab notes on other topic from here.

Question of fact- onus on D (accused of insider trading) to show you believe it was generally disclosed

When is it satisfactory general disclosure? When is it generally disclosed? ^ Question of fact.

Onus on the defendant being accused of insider trading to show that you believe it was generally disclosed (reverse onus)

Market knows, and has had time to digest it. How long is that? Whatever’s Reasonable.

NP 51-201 indicates that corp can meet “generally disclosed” defence by (a) news release, (b) announcement through press conference (although it is good to disclose on company website, this is not enough)

Texas Gulf Facts: TG puts out press release, and immediately, insiders bought up huge quantities of shares. Releasing a news release and then trading right away is not appropriate. Investors reading the news release is only one step in the process for complying with regulatory objective of allowing all investors to make an informed investment decision. Even assuming the contents of the release could be instantaneously acted upon, still should have waited until it could reasonably have been expected to appear in broad circulation.

Info must be effectively disclosed: Before insiders may act on material information, must be effectively disclosed in manner to ensure its availability to investing public. So basically, you cannot disclose and trade on the information one minute later.

National Sea

Ratio: Two-part test for when you can trade as an insider: 1. Must be disseminated to the trading public; and 2. The trading public must have had it in their possession for a period of time allowing them to digest it in accordance with the nature/ complexity of the info (generally, wait one full trading day after release of info) Facts: Insiders bought a bunch of shares once it was on the wire. Said you still have to wait.

Reasons:

  • Two part test for when you can trade as an insider and one day general rule:

o 1. Must be disseminated to the trading public; and

o 2. The trading public must have had it in their possession for a period of time allowing them to digest it in accordance with the nature/complexity of the information

■ Thus, insiders are NOT free to trade as soon as press release is on Dow Jones News Wire^ need to give it enough time to be effectively disclosed

  • No Firm rule re: interval, BUT a safe working rule: should wait a minimum of one full trading day after release of information
  • Factors to consider in length of time:

o a. nature/complexity of information o b. nature of market for stock

o c. place of company’s operations vs. place of disseminating info thru news release Policy Notes:

  • Reverse Policy issue: *my argument: doesn’t really create equal playing field, b/c now the public gets to buy it before you do, whoever has their ear to the ground and is monitoring the Dow Jones, for instance.
  • Bright line tests don’t work ^ you cannot legislate integrity

You can grab notes on other topic from here.


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