15 U.S.C. § 78t–1: Liability to contemporaneous…

Summary

Anyone who trades a security while they have important secret information can be sued by a person who traded the same class of that security at about the same time. The money someone can be ordered to pay is limited to the profit they made or the loss they avoided from the illegal trade. That amount is reduced by any money the person was already ordered to give up by the SEC in a related court case. An employer is not automatically liable just for hiring a wrongdoer, and lawsuits must be started within 5 years of the last bad trade. Anyone who gives out the secret information is equally responsible for the same damages as the traders they told. This does not stop other kinds of lawsuits or government actions by the SEC or the Attorney General.

Title 15, §78t–1

Commerce and Trade, Source: USLM XML via OLRC

(a)Private rights of action based on contemporaneous trading

Any person who violates any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security while in possession of material, nonpublic information shall be liable in an action in any court of competent jurisdiction to any person who, contemporaneously with the purchase or sale of securities that is the subject of such violation, has purchased (where such violation is based on a sale of securities) or sold (where such violation is based on a purchase of securities) securities of the same class.

(b)Limitations on liability

(1)Contemporaneous trading actions limited to profit gained or loss avoided

The total amount of damages imposed under subsection (a) shall not exceed the profit gained or loss avoided in the transaction or transactions that are the subject of the violation.

(2)Offsetting disgorgements against liability

The total amount of damages imposed against any person under subsection (a) shall be diminished by the amounts, if any, that such person may be required to disgorge, pursuant to a court order obtained at the instance of the Commission, in a proceeding brought under section 78u(d) of this title relating to the same transaction or transactions.

(3)Controlling person liability

No person shall be liable under this section solely by reason of employing another person who is liable under this section, but the liability of a controlling person under this section shall be subject to section 78t(a) of this title.

(4)Statute of limitations

No action may be brought under this section more than 5 years after the date of the last transaction that is the subject of the violation.

(c)Joint and several liability for communicating

Any person who violates any provision of this chapter or the rules or regulations thereunder by communicating material, nonpublic information shall be jointly and severally liable under subsection (a) with, and to the same extent as, any person or persons liable under subsection (a) to whom the communication was directed.

(d)Authority not to restrict other express or implied rights of action

Nothing in this section shall be construed to limit or condition the right of any person to bring an action to enforce a requirement of this chapter or the availability of any cause of action implied from a provision of this chapter.

(e)Provisions not to affect public prosecutions

This section shall not be construed to bar or limit in any manner any action by the Commission or the Attorney General under any other provision of this chapter, nor shall it bar or limit in any manner any action to recover penalties, or to seek any other order regarding penalties.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsecs. (a), (c), (d), and (e), was in the original “this title”. See

References in Text

note set out under section 78a of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Section not applicable to actions occurring before Nov. 19, 1988, see section 9 of Pub. L. 100–704 set out as an

Effective Date

of 1988 Amendment note under section 78o of this title.

§78t–1 Liability to Contemporaneous Traders for Insider Trading

Summary

Title 15, §78t–1

Notes & Related Subsidiaries

Editorial Notes

References in Text

References in Text

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata