The WSJ is reporting that the insider trading case against Mark Cuban has been reinstated by the 5th Circuit:
The Fifth Circuit Court of Appeals said there was "more than a plausible" basis to find that Mr. Cuban agreed not to trade stock in Mamma.com, an Internet search company, after speaking to the company's executives and learning about a private stock offering....
Mr. Cuban has denied wrongdoing. His lawyers have maintained that he agreed to keep the information about the stock offering confidential, but wasn't required to hold on to his shares. The district court agreed and dismissed the insider trading lawsuit.
The appeals court decision sends the case back to the lower court for further litigation or settlement discussions.
The appeals court said under Mr. Cuban's understanding "he was allowed to trade on the information but prohibited from telling others—in effect providing him an exclusive license to trade on material nonpublic information."
The court added that based on the limited court record of facts, "it is at least equally plausible that all sides understood there was to be no trading before" the announcement of the stock offering.
I have been unable to find a copy of the opinion, so the following is pure speculation, but I gather from the tenor of this and other reports that the 5th Circuit has accepted the proposition that a mere agreement of confidentiality suffices to trigger insider trading liability. The erosion of the fiduciary duty requirement in insider trading law thus continues. As such, I'll be particularly interested to see how the opinion squares this result with Fifth Circuit’s opinion in Regents of the Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372, 389 (5th Cir. 2007), which held that “the [Supreme] Court . . . has established that a device, such as a scheme, is not ‘deceptive’ unless it involves breach of some duty of candid disclosure."
On the relevant law and policy issues, see my essay RULING ON HACKERS AS INSIDE TRADERS: RIGHT IN THEORY, WRONG ON THE LAW
Update: I've now had a chance to read the Fifth Circuit opinion and comment on it here.
