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

Summary

If a person buys or sells a stock or other security while they have important secret information that the public does not have, people who traded the same kind of security at the same time and in the opposite direction can sue that person. If someone shares the secret information with others, the sharer is just as responsible to those traders as the person who used the tip. The money the wrongdoer must pay can’t be more than the profit they made or the loss they avoided. Any damages owed will be reduced by amounts the person was ordered to give up in a related SEC case under section 78u(d). You are not liable just because you employed someone who broke the rule, but a controlling person’s liability is governed by section 78t(a). Lawsuits must start within 5 years after the last trade. People can still bring other private claims to enforce the rules, and the SEC or the U.S. Attorney General can still bring other actions or seek penalties.