Litigation experts have exposed weaknesses in the Securities and Exchange Commission?s insider trading case against billionaire investor Mark Cuban, saying current securities laws are ambiguous about whether he would be considered an insider. Whether or not Mr. Cuban gets off, the case shows that private investments in public equity, or PIPEs, are becoming a larger bone of contention for short-term investors. ...
Some, such as UCLA securities law professor Stephen Bainbridge, think the SEC has a good case.
Writing on his blog last week, Mr. Bainbridge said the SEC might try to prove that Mr. Cuban is a ?constructive insider.?
In some cases, he said, accountants, lawyers or other outsiders may become fiduciaries if given inside information for corporate purposes. Although Mr. Cuban was a non-controlling shareholder, previous lawsuits have shown that a simple confidentiality agreement could have made Mr. Cuban an insider.
Yes, but. I also said that the SEC will need to "get a court willing to give the rules a liberal construction on one key point"; namely, whether Cuban is a constructive insider.
