• This is the classic definition. The Supreme Court has also approved a broader definition, known as the “misappropriation theory”: the deceitful acquisition and misuse of information that properly belongs to persons to whom one owes a duty. Thus, under the misappropriation theory, it is insider trading for a lawyer to trade in the stock of XYZ Corp. after learning that a client of the lawyer’s firm is planning a takeover of XYZ. But under the classic definition, that is not insider trading because the lawyer owed no duty to XYZ itself.
— Also termed insider dealing. [Cases: Securities Regulation 60.28. C.J.S. Securities Regulation §§ 179, 182.]
