Insider Trading Defense

<h2>Insider Trading Law</h2><p>Insider trading — buying or selling securities based on material, nonpublic information in violation of a duty of trust or confidence — is prohibited under Section 10(b) of the Securities Exchange Act and Rule 10b-5. Violations can result in both civil SEC enforcement actions and criminal prosecution by the Department of Justice.</p><h2>Theories of Liability</h2><ul><li><strong>Classical theory:</strong> Corporate insiders trading on material nonpublic information about their own company</li><li><strong>Misappropriation theory:</strong> Outsiders who misappropriate confidential information from the source</li><li><strong>Tipper-tippee liability:</strong> Persons who receive and trade on material nonpublic information from an insider</li></ul>