Dirks is the leading case on “tippee” liability under rule 10b-5. A “tippee” is a corporate outsider who trades after receiving material nonpublic information from an insider or another tippee.
1. According to the majority, when are tippees liable under rule 10b-5?
2. Why did the majority exonerate Dirks?
3. As a policy matter, should Dirks have been obliged to report to the SEC before telling his clients?