In addition, the Williams Act requires that an individual wishing to offer cash tender of 15 to 20 percent of the current market price to acquire a corporation must registered under federal law to disclose to the federal Securities and Exchange Commission (SEC). Such disclosures include; source of the money to be used in the offer, existing contractual agreements with the corporation to be purchased, intention of the purchase, and the plans to be implemented upon the successful completion of the tender offer (Miller & Jentz, 2009).

Moreover, disclosures with SEC by an individual wishing to purchase 5 percent of a given corporation should be copied to all national securities exchanges were such stocks are traded to make sure that the information is accessible to investors. Under this law, SEC enjoys legal authority to take legal action against persons acting in violation of the provisions. This includes the use of falsified and misleading statements to gain unfair competition in tender offers. The US Supreme Court has made numerous landmark case decisions regarding insider trading.

During the 1909 case of Strong v. Repide, the court ruled that directors are not bound by the law to provide their knowledge to stakeholders about their actions in buying shares from the company (Macey, 1991). However, in the 1984 case of Dirks v. SEC, the Supreme Court found that third party insiders should be held liable for engaging in illegal insider trading provided it is established that they had reasonable belief that the provider of the information had breached a fiduciary duty in the process (Macey, 1991). Such are also applicable if the tipper is found to have gained personal benefits from the receiver upon disclosure the confidential company information.

Further, the ruling in the Dirks v. SEC case led to the establishment of the concept of constructive insiders. According to the court, constructive insiders include members who gain access to non-public information from a corporation while providing it with services.

Such include; lawyers and bankers among other. The court held that constructive insiders are liable of violations of insider trading since their duties dictate against disclosure of their client’s confidential information. Another landmark case regarding insider trading is the United States v.Carpenter case of 1986 in which the Supreme Court upheld the concept of misappropriation of information as an insider trading violation (investigator general zambia, 2009).

From the facts of the case, the defendant was conviction for insider trading violations after acquiring non-public information from a journalist. This court argued that acquisition of information through a confidential relationship with another individual amount to a breach of fiduciary and the individual must account for any benefits gained from the information.

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