Remember, classical insider trading liability starts with an insider who violates their fiduciary duty to their principle by trading in their own company's stock while in possession of inside information. What about liability for trading in situations where the trading doesn't involve an insider?
Tipping by insiders to outsiders is a direct challenge to the classical insider trading doctrine. Because the recipient of inside information does not have a fiduciary duty to the shareholders or the corporation, classical insider trading theory does not extend to recipients of inside information. Courts have responded to these situations by finding ways to extend liability to recipients of inside information, "tippees".
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