There is an excellent post on Time.com addressing the legal issues in the SEC's insider trading case against Dallas Mavericks owner Mark Cuban. I spoke to the reporter at some length and was really impressed with her concern for getting it right, which is reflected in the care and craftsmanship in the article. Unlike a lot of reporters who just want me to give them a quote that fits their pre-existing story plans, she really wanted to understand what was going on in this case.
Did Mark Cuban have a duty to Mamma.com? That question will take center court as the Securities and Exchange Commission (SEC) sues Cuban, an Internet entrepreneur and owner of the Dallas Mavericks basketball team, for selling his stake in the Web company after the CEO slipped him nonpublic information about an additional stock offering. Cuban, known for his outsize personality, has come out swinging against the SEC and what he calls its "win at any cost ambitions," promising to keep the case ? and the murkiness of insider trading law ? in the public spotlight in a way not seen since Martha Stewart's sale of her ImClone shares.
Ms. Kiviat then goes on to review the relevant legal rules concisely and clearly. She concludes:
Stephen Bainbridge, a law professor at UCLA who has followed insider trading law for two decades and written a book on the topic, points out that the case law around whether or not a contract of confidentiality suffices for illegal insider trading "is not as clear as one would like." Some court findings, he says, suggest that it's not enough for two parties to merely agree to keep information confidential ? they must also have a higher-level relationship, like that of a lawyer and client or a company and employee.
The SEC has brought charges against Cuban under a particular legal theory ? but the legal theories around illegal insider trading have a long history of getting rewritten in the courts. "He's an interesting guy for them to have picked. He's not going to roll over and play dead," says Bainbridge. "If he wants to, he has the resources to take this case all the way up to the Supreme Court." If it comes to that, the case could take on real significance.
