[17] Therefore, a TGS employee who traded after the statement was read but before Dow Jones reported the news should have waited until it appeared on “the media of widest circulation,” the Dow Jones ticker. SECURITIES AND EXCHANGE COMMISSION. Inc. Specifically, if corporate management could show it disseminated information in good faith after diligently determining it was “the whole truth,” there would be no 10b-5 violation. This edition is on 0 lists. SECURITIES AND EXCHANGE COMMISSION. 3:15-cv-01097-K (N.D. Tex. Brief Fact Summary. denied 394 u.s. 976 (1969)j the second circuit defined a material fact as information which is likely to affect the market price of any of the company's securities or is likely to be considered important by reasonable investors j including speculative investors j in 240.10b-5. [27] On the question of stock options, the dissent would have held that it is acceptable for top managers who have undisclosed information to accept options, as long as the managers did not exercise them before the information became public. Citation Securities & Exchange Com. It did not matter that there was still an element of uncertainty in the eventual mineral mining, but the key element was whether a reasonable person would believe that the information would be relevant to the price of the stock. [23] Because the district court had applied the wrong standard (whether the drafters had exercised reasonable business judgment), the court remanded without deciding if the first statement was misleading.[23]. Sec. 316 F.2d 137 - BERKO v. SECURITIES AND EXCHANGE COMMISSION, United States Court of Appeals Second Circuit. [43] In addition, the Court endorsed Texas Gulf Sulphur's “probability-magnitude test” as a factor for determining materiality in Basic, Inc. v. Levinson (1988). Plaintiff, the Securities and Exchange Commission, brought this suit against Defendants, Texas Gulf Sulphur Co., et al., after Defendants bought shares of Texas Gulf while they secretly had … [8] The suit alleged the employees had, variously: bought TGS stock on the basis of material nonpublic information; divulged nonpublic information to outsiders; or accepted stock options without disclosing material information to the Board. [26], Judge Moore, joined by Chief Judge Lumbard, dissented from the majority opinion and drew fault with almost every element of it. denied Coates v. Securities and Exchange Comm., 394 U.S. 976, 89 S.Ct. Sec. [30] Most fundamentally, he objected to the “unrealistic approach” the majority took to corporate press releases, which he believed set an overly exacting standard and subjected corporations to judicial second guessing. [14], On the issue of tipper-tippee liability, the court held that by sharing material information with corporate outsiders who then bought TGS stock, an employee violated Rule 10b-5. 1. Kokesh. [2], Over the years, the Supreme Court addressed many of the Second Circuit's holdings, rejecting some and adopting others. § 78j(b), and Rule 10b–5, 17 C.F.R. [4], After newspapers reported TGS had uncovered significant mineral deposits, the company released a statement disclaiming the reports. Securities and Exchange Commission v. Texas Gulf Sulphur Co., a Texas Corporation, ... (1968) Fed. [21], The court held that the test for determining if a statement was misleading under 10b-5 is whether a reasonable investor would have been misled. In his view, a merely negligent violation of Rule 10b-5 (such as TGS's release of its first statement) would not necessarily establish a private claim for damages. v. Texas Gulf Sulphur Co., 258 F. Supp. [11] It held that only information about situations which, if disclosed, would have a substantial effect on stock price was material. , . Texas Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir. Securities and Exchange Commission v. Texas Gulf Sulphur Co. securities and exchange commission v. Texas Gulf Sulphur Co. United States Court of Appeals 401 F.2d 833 (2nd Cir. The mission of the State Securities Board is to protect Texas investors. In particular, it set out standards for materiality of inside information, effective disclosure of such information, and what constitutes a "misleading" statement. SECURITIES AND EXCHANGE COMMISSION v. TEXAS GULF SULPHUR COMPANY Email | Print | Comments (0) No. Which of the following was the result on appeal in Securities and Exchange Commission v. Texas Gulf Sulphur Co, the case in the textbook in which it was alleged that corporate employees possessed inside information involving the likelihood of a major mineral find precluding them from trading in their company's stock? United States Court of Appeals Second Circuit Argued March 20, 1967, Submitted to in Banc Court May 2, 1968 Decided Aug. 13, 1968 Before LUMBARD, Chief Judge, and WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS, ANDERSON and FEINBERG, Circuit Judges. 1182. the views expressed herein are those of ... in sec v. texas gulf sulphur co' j 401 f.2d 833 (2d cir. 23239 / April 10, 2015 Securities and Exchange Commission v. Mieka Energy Corporation, et al., Civil Action No. [7], The U.S. Securities and Exchange Commission (SEC) brought claims against twelve TGS employees as well as the company itself for violating section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. 262 (S.D.N.Y. In addition, the "price impact" test the court used to determine materiality has been adopted in jurisdictions outside the U.S.[45], Concurring Opinions by Judges Kaufman, Anderson, and Hays, United States Court of Appeals for the Second Circuit, Texas Gulf Sulphur 50th Anniversary Symposium Issue, Securities Law in the Sixties: The Supreme Court, the Second Circuit, and the Triumph of Purpose over Text, "From Equality to Duty: On Altering the Reach, Impact, and Meaning of the Texas Gulf Legacy", "Texas Gulf Sulphur at Fifty--A Contemporary & Historical Perspective", https://en.wikipedia.org/w/index.php?title=SEC_v._Texas_Gulf_Sulphur_Co.&oldid=995412354, United States Court of Appeals for the Second Circuit cases, U.S. Securities and Exchange Commission litigation, Creative Commons Attribution-ShareAlike License, This page was last edited on 20 December 2020, at 22:13. SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. TEXAS GULF SULPHUR COMPANY, a Texas Corporation, et al., Defendants-Appellants. Consistent with that purpose, the Agency seeks to ensure a free and competitive securities market for Texas, increase investor confidence, and thereby encourage the formation of capital and the creation of new jobs in Texas. § 78a et seq. 881, as amended, 15 U.S.C. The company was formed to exploit the newly discovered sulfur deposit in the Big Hill salt dome near Matagorda, Texas, using the Frasch Process. United States District Court, E.D. 1454, 22 L.Ed.2d 756 (1969). [8], A federal district court concluded that information about the exploration only became material several days before the company's first statement, and therefore only inside activity after that point and before the company fully disclosed its findings were unlawful. v. CAPITAL GAINS RESEARCH BUREAU, United States Court of Appeals Second Circuit. 1182. Judge Waterman wrote the majority opinion, which included holdings on a number of legal issues related to insider trading and false or misleading statements. 78j(b) (1970), and the Commission's Rule 10b-5, 17 C.F.R. Sec. SEC v. Texas Gulf Sulphur Co.[1] is a case from the United States Court of Appeals for the Second Circuit which articulated standards for a number of aspects of insider trading law under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. This case requires us to apply the materiality requirement of § 10(b) of the Securities Exchange Act of 1934, (1934 Act), 48 Stat. TEXAS GULF SULPHUR CO. 401 F.2d 833 Facts: The two sides of this case are two officers, employees or were closely tied to employees of Texas Gulf were defendants. Opinion for Securities and Exchange Commission v. American Beryllium & Oil Corp., 303 F. Supp. [5] Several days later, at 10:00 a.m., TGS read a statement to the press confirming a major find, and the news was reported on the Dow Jones ticker tape at 10:54 a.m.[6] Several TGS employees had bought company stock before the announcement, and one placed an order after the announcement but before the Dow Jones report. , . Read the Court's full decision on FindLaw. Opinion for Fed. 262, 1966 U.S. Dist. [28] Judge Moore further objected to the majority's “reasonable investor” standard for judging misleading statements and would have instead deferred to management's business judgment. § 78u(e), against Texas Gulf Sulphur Company (TGS) and several of its officers, directors and employees, to in sec v. texas gulf sulphur co' j 401 f.2d 833 (2d cir. In Chiarella v. United States (1980), the Court rejected the rule that anyone with material inside information must disclose or abstain from trading. 446 F.2d 1301. 1966) District Court, S.D. Judge Moore objected to the majority's standard for materiality, arguing that relying on the potential impact that information might have on stock price would sweep in almost any fact related to a company. L. Rep. P 92,532 Crane Company v. Westinghouse Air Brake ... (1969) Fed. 1968), cert. 262, 1966 U.S. Dist. The case continues to receive significant scholarly attention. The plaintiff in this case is the securities and exchange commission. [4] In addition, a group of employees accepted stock options from TGS without informing the Board of the finds. § 240.10b–5. of the Securities Exchange Act of 1934. [10] Further, whether information about an event is material depends on the probability the event will occur balanced with the magnitude of the event. To punish securities fraud, the Securities and Exchange Commission is authorized to seek “equitable relief” in civil proceedings, 15 U. S. C. §78u(d)(5). Are you sure you want to remove Securities and Exchange Commission v. Texas Gulf Sulphur Co. et al. LEXIS 8334, Fed. [44], Texas Gulf Sulphur has been called "perhaps the most important federal case under the U.S. securities law. §§ 78u(e) and 78aa (the 1934 Act), against Texas Gulf Sulphur Company (TGS) and several of its officers, directors, and employees. denied, Coates v. Securities and Exchange Commission, 394 U.S. 976 , 89 S. Ct. 1454 , 22 L. Ed. [16] In addition, the court held that reading a news release is only the first step in disseminating information. The Securities and Exchange Commission brought this action against defendants Shapiro, Berman and others1 for violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 1968) The SEC (plaintiff) brought an action against the Texas Gulf Sulphur Company (TGS) and 13 of its directors, officers, and employees (defendants) for violation of Section 10(b) of the Exchange Act and SEC Rule 10(b)-5, seeking an injunction against further … Securities and Exchange Commission v. Texas Gulf Sulphur Co. et al. Washington, D.C. 20549. Opinion for Securities and Exchange Commission v. Lum's, Inc., 365 F. Supp. See SEC v. Securities and Exchange Commission v. Texas Gulf Sulphur Company. Accordingly, we reiterate our previous holding in Texas Gulf Sulphur that the SEC may seek other than injunctive relief to effectuate the purposes of the federal securities laws. ; and, Securities and Exchange Commission v. Crawford and Clayton / Lists. Held. 306 F.2d 606 - SECURITIES & EXCH. [14], As a matter of judicial interpretation, Texas Gulf Sulphur construed federal securities laws to realize Congress's “broad remedial design,” and interpreted section 10(b) as a “catchall.”[33] Justice Rehnquist later criticized this approach in Blue Chip Stamps v. Manor Drug Stores, where he famously criticized securities law developments as “a judicial oak which has grown from little more than a legislative acorn.”[34], The Texas Gulf Sulphur decision represented the first time a federal court held that insider trading violated federal securities laws. 262 Specifically, the statement had not produced any unusual market activity, nor had TGS made the statement intending to affect the company's stock price for internal benefit. Broader enforcement of restrictions on insider trading began only in the 1960s, when the U.S. Securities and Exchange Commission (SEC) prosecuted the Cady, Roberts and Texas Gulf Sulphur cases using Rule 10b-5, a catch-all provision against securities fraud. [38] Instead, the Court held that a fiduciary or similar relationship between the parties to a transaction was needed for this duty to apply. v. Texas Gulf Sulphur Co., 258 F. Supp. 1. SECURITIES AND EXCHANGE COMMISSION v. TEXAS GULF SULPHUR CO. No. § 78u(e), against Texas Gulf Sulphur Company (TGS) and several of its officers, directors and employees, to enjoin certain conduct … Plaintiff, the Securities and Exchange Commission, brought this suit against Defendants, Texas Gulf Sulphur Co., et al., after Defendants bought shares of Texas Gulf while they secretly had positive information regarding mining activities carried out by the company. SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. TEXAS GULF SULPHUR COMPANY, a Texas Corporation, et al., Defendants-Appellants. Written and curated by real attorneys at Quimbee. 1 Securities and Exchange Commission v. Texas Gulf … New York Aug. 19, 1966 Also cited by 37 other opinions; 11 references to SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 Supreme Court of the United States Dec. 9, 1963 Also cited by 501 other opinions The district court awarded the Commission summary judgment on the claim that petitioners had violated Sec- tion 17(a)(2) of the Securities Act, 15 U.S.C. [18], As to receiving stock options from TGS, the court held that members of top management had a duty to disclose any material information before doing so. … Before proceeding further we note that such of defendants' arguments as are based on a narrow construction of the phrase of § 10(b) of the Securities Exchange Act and Rule 10b-5, "in connection with the purchase or sale of any security," have been rejected by our decision in SEC v. Texas Gulf Sulphur Co., supra, 401 F.2d at 847. Case opinion for US 2nd Circuit SECURITIES AND EXCHANGE COMMISSION v. CONTORINIS. August 6, 2013. View Essay - Securities and Exchange Commission v. Texas Gulf Sulphur Co..docx from MGMT 520 at DeVry University, Addison. Sec. 1970), the SEC’s argument in favor of court-ordered disgorgement has invoked the federal courts’ “‘inherent equity power to grant relief ancillary to an injunction.’” The district court, finding that violations had been committed, enjoined defendants from further violations of … During this time, several TGS employees and outsiders who had received tips from them purchased TGS sto… The dispute centered on the actions of a dozen employees of the Texas Gulf Sulphur Co. (TGS) following the discovery of major mineral deposits in Canada. LEXIS 8334, Fed. Derivative Litigation, Broz v. Cellular Information Systems, Inc, In re Wheelabrator Technologies, Inc. Shareholders Litigation, Great Lakes Chemical Corp. v. Monsanto Co, Securities and Exchange Commission v. Texas Gulf Sulphur Co, Dirks v. Securities and Exchange Commission, Securities & Exchange Com. ; and, Securities and Exchange Commission v. Crawford and Clayton by Sterry R. Waterman, 1968, Commerce Clearing House edition, in English The Texas Gulf Sulphur Company was one of the largest sulfur mining companies in the world from 1919 to 1981.. 4:13-CV-416. Comm'n v. Texas Gulf Sulphur Co., supra, 401 F.2d at 849. Texas Gulf, utilizing a geological survey, was conducting mining exploration in Canada. [12] In the case of TGS, information about the initial finds was material despite being “remote,” since knowing such a vast mine might have been found could have affected TGS's stock price. 446 F.2d 1301. A detailed description is set forth in our prior opinion, 401 F.2d 833 (2 Cir. The issue is whether Defendants utilized material inside information when they purchase shares and calls of Texas Gulf stock. In March 1959, aerial geophysical surveys were conducted over more than fifteen thousand square miles of the area. TGS’ president instructed the exploration group not to share the information with others. 1968) The SEC (plaintiff) brought an action against the Texas Gulf Sulphur Company (TGS) and 13 of its directors, officers, and employees (defendants) for violation of Section 10(b) of the Exchange Act and SEC Rule 10(b)-5, seeking an injunction against further […] In those and subsequent cases that shaped the evolution of the general insider trading prohibition, the SEC … [38] While Texas Gulf Sulphur held that material information included facts which “in reasonable and objective contemplation might” affect a company's stock price,[39] the Supreme Court in TSC Industries, Inc. v. Northway, Inc. (1976) set the standard at whether "a reasonable shareholder would consider it important. The Gulf Sulphur Company was formed on December 23, 1909 by a group of investors from St. Louis and Texas. 325 F.Supp. The failure to include this information in the annual report for 1971 and the quarterly reports for the year required by Section 13(a) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 to be filed with the Commission, was a material omission and constituted a violation of those provisions. [17] The court rejected this argument, holding that specific intent to defraud is not necessary to establish 10b-5 liability; a defendant's negligence suffices. View Essay - Securities and Exchange Commission v. Texas Gulf Sulphur Co..docx from MGMT 520 at DeVry University, Addison. 240.10b-5. [13] Therefore, the court concluded that all trading by people who knew about the initial finds violated Rule 10b-5, setting the point at which the information became material earlier than the district court. 912 — Brought to you by Free Law Project, a non-profit dedicated to creating high quality open legal information. Sec. Synopsis of Rule of Law. View Case; Cited Cases; Citing Case ; Citing Cases ... 446 F.2d 1301 - SECURITIES AND EXCHANGE COM'N v. TEXAS GULF SULPHUR CO., United States Court of Appeals, Second Circuit. v. CAPITAL GAINS RESEARCH BUREAU, United States Court of Appeals Second Circuit. Since the time of the leading case Securities and Exchange Commission v. Texas Gulf Sulphur Company, 312 F. Supp. Judge Friendly wrote a separate concurring opinion expressing his concern about the possibility of private suits for large money damages based only on negligently prepared press releases. The Securities and Exchange Commission brought this action against defendants Shapiro, Berman and others1 for violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Texas, Sherman Division. Kokesh v. Securities and Exchange Commission ... SEC v. Texas Gulf Sulphur Co., 312 F. Supp. [2] The SEC in Cady, Roberts & Co. (1961) had extensively treated insider trading and set out the "disclose or abstain rule," but as an agency opinion, it did not have precedential value in federal courts. L. Rep. (CCH) P91,805 (S.D.N.Y. The operations revealed numerous variations in … The court endorsed a “disclose or abstain” rule for insider trading which required anyone with material inside information about a company to either disclose it to the public or abstain from trading in the company's stock. Read the Court's full decision on FindLaw. View Case; Cited Cases; Citing Case ; Citing Cases ... 446 F.2d 1301 - SECURITIES AND EXCHANGE COM'N v. TEXAS GULF SULPHUR CO., United States Court of Appeals, Second Circuit. In March 1959, aerial geophysical surveys were conducted over more than fifteen thousand square miles of the area. Washington, D.C. 20549 . 77 (S.D.N.Y. 1 Securities and Exchange Commission v. Texas Gulf … 77q(a)(2), Pursuant to Rule 13a-16 or 15d-16. The Securities and Exchange Commission (“SEC”) filed this civil enforcement action against defendants Nelson J. Obus, Peter F. Black, and Thomas Bradley Strickland alleging insider trading in violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. "9 Material information was defined as information TGS’ president instructed the exploration group not to share the information with others. 65 Civ. SECURITIES AND EXCHANGE COMMISSION v. TEXAS GULF SULPHUR COMPANY Email | Print | Comments (0) No. We must also determine whether a … United States Court of Appeals Second Circuit Argued March 20, 1967, Submitted to in Banc Court May 2, 1968 Decided Aug. 13, 1968 Before LUMBARD, Chief Judge, and WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS, ANDERSON and FEINBERG, Circuit Judges. 65 Civ. After TGS conducted exploratory drilling and found evidence of significant deposits, it decided to acquire surrounding land. 1968) cert. Pursuant to Rule 13a-16 or 15d-16. "[45] Certain of its holdings remain good law today. The within appeals bring before us for the second time the well-known combinations of situations that arose out of Texas Gulf Sulphur's (hereinafter TGS) discovery of rich ore deposits near Timmins, Ontario, and the accompanying stock transactions by the appellants. U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. Texas Gulf, utilizing a geological survey, was … Sharan Sadhwani GB 110-010 SECURITIES AND EXCHANGE COMMISSION v. TEXAS GULF SULPHUR CO. 401 F.2d 833 Facts: The two sides of this case are two officers, employees or were closely tied to employees of Texas Gulf were defendants. 296, Docket 30882. The Duties of Officers, Directors, and Other Insiders, LSAT Logic Games (June 2007 Practice Exam), LSAT Logical Reasoning I (June 2007 Practice Exam), LSAT Logical Reasoning II (June 2007 Practice Exam), In re Caremark Intern. 1968) (in banc). Securities and Exchange Commission v. Texas Gulf Sulphur Co.8 defined "insider" as referring to "employees as well as officers, di-rectors and controlling stockholders who are in possession of ma-terial undisclosed information obtained in the course of their employment. Aug. 19, 1966) Brief Fact Summary. Securities and Exchange Commission v. Texas Gulf Sulphur Co. et al. Further, Defendants should not act upon the information until the information is disseminated to the point that the public would have had a reasonable opportunity to act on it. 1968) cert. [31], The majority drew heavily on what it viewed as the core policy behind Rule 10b-5, that “all investors trading on impersonal exchanges [should] have relatively equal access to material information.”[32] The court stated that the inequities of an unlevel playing field should not be "shrugged off as inevitable in our way of life” nor remain uncorrected. Therefore, an employee who failed to do so violated Rule 10b-5. [10] Notably, this obligation under Rule 10b-5 applied to anyone possessing such information, including people that “may not be strictly termed an ‘insider.’”[10], The court then addressed what qualifies as “material” inside information, the threshold for the duty to disclose or abstain. securities and exchange commission * the securities and exchange commission" as a matter of policy" disclaims responsibility for speeches by its commissioners. The Defendants withheld information that was material to shareholders and therefore were acting on insider information when they purchased their shares and calls on Texas Gulf stock. 296, Docket 30882. Issue. [35] After the Second Circuit issued its opinion, the Supreme Court declined review. Judge Kaufman wrote a concurring opinion, joining the majority as well as Judge Friendly's call to provide more guidance on private damages claims. HISTORICAL AND ENVIRONMENTAL SETTING In 1957, the Texas Gulf Sulphur Company began exploring for minerals in eastern Canada. denied Coates v. Securities and Exchange Comm., 394 U.S. 976, 89 S.Ct. denied 394 u.s. 976 (1969)j the second In . [36][37] Absent controlling Supreme Court rulings on the issues, Texas Gulf Sulphur became the "pre-eminent insider trading rule" for the next decade. COM. The plaintiff in this case is the securities and exchange commission. 21(e) of the Securities Exchange Act of 1934 (the Act), 15 U.S.C. The mission of the State Securities Board is to protect Texas investors. [17], Employees who traded before Dow Jones reported the news but claimed they honestly believed the news had become public raised a “good faith” defense. 77, 91 (SDNY 1970), aff ‘d in part and rev’d in part, 446 F. 2d 1301 (CA2 1971). 1046 — Brought to you by Free Law Project, a non-profit dedicated to creating high quality open legal information. L. Rep. P 93,072 Securities and Exchange Commission v. Texas Gulf Sulphur Company, a..., 446 F.2d 1301 — Brought to you by Free Law Project, a non-profit dedicated to creating high quality open legal information.
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