Court Opinion

ID: 9842993
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:23:46.22362+00
Date Added: 2024-06-11T09:14:23.999055
License: Public Domain

MINER, Circuit Judge,
dissenting in part:
Since I am of the opinion that the misappropriation theory cannot be interpreted so expansively as to encompass the activities of these defendants, I respectfully dissent from so much of the majority opinion as affirms the convictions for securities fraud.
Until today, the misappropriation theory of criminal liability for securities fraud was applied only in those cases involving the taking and use of non-public, confidential, securities-related information by those who obtain that information through special relationships with their sources of knowledge. S.E.C. v. Materia, 745 F.2d 197 (2d Cir.1984) (employee of printing establishment traded in securities on the basis of confidential takeover-target data stolen from his employer), cert. denied, — U.S. —, 105 S.Ct. 2112, 85 L.Ed.2d 477 (1985); United States v. Newman, 664 F.2d 12 (2d Cir.1981) (employees of investment banks purchased securities on the strength of misappropriated confidential merger and acquisition information entrusted to the banks by corporate clients), aff'd after remand, 722 F.2d 729, cert. denied, 464 U.S. 863, 104 S.Ct. 193, 78 L.Ed.2d 170 (1983); S.E.C. v. Musella, 578 F.Supp. 425 (S.D.N.Y.1984) (manager of office services for law firm improperly acquired tender offer information and traded on it in violation of fiduciary duty to firm and its clients). “[T]he theory premises liability on a party’s deception of those who have given him privileged access to confidential information.” Aldave, Misappropriation: A General Theory of Liability *1037for Trading on Nonpublic Information, 13 Hofstra L. Rev. 101, 124 (1984).
No confidential securities information imparted by reason of any special relationship was purloined by these defendants. The “Heard” columns written by Winans consisted of high quality, accurate articles dealing with the strengths and weaknesses of various securities, and the research data upon which the columns were based were fully available to the public. To say that the “publication schedule” of the Wall Street Journal was the non-public, confidential information stolen by the defendants is to extend the sweep of section 10(b) and rule 10b-5 beyond all reasonable bounds. Knowledge of publication dates simply is not the special securities-related knowledge implicated in the misappropriation theory. Moreover, it cannot be said that the schedules were secrets to which Winans always was privy, since he frequently did not know which writings would be published, when they would be published or even if they would be published.
While the proscription of fraudulent and deceptive practices in connection with the purchase and sale of securities is a broad one, it never was intended to protect the reputation, or enforce the ethical standards, of a financial newspaper. Cf. A.T. Brod & Co. v. Perlow, 375 F.2d 393, 396 (2d Cir.1967) (section 10(b) and rule 10b-5 were “designed to protect both investors and ‘the public interest’ ”). It seems especially ludicrous for the government to contend that the court should enforce the Wall Street Journal’s conflict of interest policy prohibiting employees from trading on the basis of pre-publication information while conceding that the Journal itself is not prohibited from trading on such information. Harm to reputation, rather than to securities markets or market participants, never has been recognized as a proper subject for redress under section 10(b) or rule 10b-5.
In sum, I do not believe that the securities fraud provisions were designed to prohibit the type of fraudulent conduct engaged in by these defendants. Such conduct is addressed adequately by the statutes establishing the mail and wire fraud offenses of which the defendants stand convicted. Under those statutes, it is sufficient for the imposition of criminal liability that an employee has failed to disclose to his employer any material information he is under a fiduciary duty to disclose. Newman, 664 F.2d at 19; United States v. Bronston, 658 F.2d 920 (2d Cir.1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982).