Opinion ID: 405001
Heading Depth: 3
Heading Rank: 1

Heading: Insider Liability

Text: 26 Feldman correctly argues that a corporate insider must abstain from trading in the shares of his corporation unless he has first disclosed all material inside information known to him. Feldman fails, however, to show by substantial evidence that Simkins was an insider. 27 Simkins publicly stated his belief that the merger offer of $15.00 per share was insufficient. Feldman asserts these statements artificially inflated the stock's price and that in these circumstances, Simkins had a duty under 10b-5 to disclose the fact that he planned to sell his stock in Fibreboard. 28 Insider status is normally reserved for officers, directors, controlling shareholders of a corporation or to those having a special relationship affording access to inside information. Chiarella v. United States, 445 U.S. 222, 227, 100 S.Ct. 1108, 1114, 63 L.Ed.2d 348 (1980); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 1005 (2d Cir. 1968), cert. denied, 404 U.S. 1005, 92 S.Ct. 561, 30 L.Ed.2d 558 (1971). 29 (5-7) The test to determine insider status is whether the person has access to confidential information intended to be available only for a corporate purpose and not for the personal benefit of anyone. Matter of Cady, Roberts & Co., 40 SEC 907, 912 (1961). Simkins had no such access. As the district court pointed out, (h)e was not a controlling shareholder ... he did not even have representation on the board of directors and it is not contended that he had access to any non-public corporate information. 30 Moreover, the duty of disclosure does not encompass a duty to confer upon outside investors the benefit of the insider's superior financial or other expert analysis. Texas Gulf Sulphur, 401 F.2d at 848. Because Simkins' decision to sell his Fibreboard holdings was based on his analysis of the market, and not on insider corporate information, he cannot be held liable for any failure to disclose.