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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellant, v. TEXAS GULF SULPHUR CO., a Texas Corporation, Charles F. Fogarty, Richard D. Mollison, Walter Holyk, Kenneth H. Darke, Francis G. Coates, Claude O. Stephens, John A. Murray, Earl L. Huntington, and Harold B. Kline, Defendants-Appellees. SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. David M. CRAWFORD and Richard H. Clayton, Defendants-Appellants.

Headnote

The following case, Texas Gulf Sulphur is an early federal insider trading case.  In TGS, the court starts from the position that insiders, as fiduciaries, have an obligation not to use the corporation’s information for their personal benefit. As fiduciaries, insiders have an obligation to “disclose” the confidential inside information, or “abstain from trading” while in possession of the corporation’s material, confidential inside information.  Questions arise as to what information is material and when is information no longer confidential such that an insider may freely trade on it.