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Journal Article

Securities Trading and Corporate Information Practices: The Implications of the Texas Gulf Sulphur Proceeding

Arthur Fleischer, Jr.
Virginia Law Review
Vol. 51, No. 7 (Nov., 1965), pp. 1271-1305
Published by: Virginia Law Review
DOI: 10.2307/1071622
Stable URL: http://www.jstor.org/stable/1071622
Page Count: 35
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Securities Trading and Corporate Information Practices: The Implications of the Texas Gulf Sulphur Proceeding
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Abstract

The regulation of insider trading practices under rule 10b-5 of the Securities and Exchange Commission has been a source of lively debate and controversy ever since the rule's inception. Considerable public interest has been focused on the subject by the Commission's pending suit against Texas Gulf Sulphur Company and a portion of its management, growing out of alleged improper securities transactions preceding the announcement last year of the company's Canadian mineral strike. Mr. Fleischer examines the relationship of rule 10b-5 both to insider trading and to corporate information practices generally, and concludes that the complaint in the Texas Gulf Sulphur case urges upon the court no radical departure from the development of federal securities regulation law in this area. He views the deterrence of insider trading abuses as the major thrust of rule 10b-5 and decides that the rule should apply to insider trading on stock exchanges as well as to face-to-face transactions. He argues that the operative element in the analysis should always be the conduct of the insider, and not the propriety of the corporation's withholding the information in question or the possibility that the injured stockholder would have suffered the same injury had he traded with anyone at the time when he sold. Finally, Mr. Fleischer points out that the most satisfactory solution to problems in this area lies in the development of corporate information practices and company rules designed to coordinate the dissemination of information and the regulation of insider trading in such a manner as to assure stockholders and the investing public at large that federal securities laws are being followed.

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