62 Geo. Wash. L. Rev. 432 (1993-1994)
Reconsideration of the Disgorgement Remedy in Tipper-Tippee Insider Trading Cases

handle is hein.journals/gwlr62 and id is 440 raw text is: Note
A RECONSIDERATION OF THE DISGORGEMENT REMEDY
IN TIPPER-TIPPEE INSIDER TRADING CASES
John K. Robinson
Introduction
Most things in law, and particularly in the law of equity, make sense.
In fact, the law's attempt to reflect reality accurately should cause us to
look closely for justification when the resolution of a legal question
does not make sense. Andjust as important, when the reality underly-
ing a formerly sensible rule changes, it is fundamental that the law
should change to keep pace.'
Both the courts and the Securities and Exchange Commission (SEC
or Commission) have violated this fundamental rule with respect to
disgorgement in insider trading cases under the federal securities
laws. They have, in effect, crafted their own definition of disgorge-
ment. Courts have long held that trading on the basis of material
nonpublic information while in a position of responsibility is a viola-
tion of section 10(b) of the Securities Exchange Act of 1934 (the 1934
Act),2 and Rule lOb-53 promulgated thereunder.4 This makes sense.
The SEC, however, has demanded that a person who feeds material
nonpublic information (the tipper) gratis to another person who
1. CASS R. SUtsMrIN, THE PARTIAL CONSTITUTION 349 (1993) (arguing that the status
quo can be justified only to the extent that reasons [can] be offered on its behalf); see
ROBERT H. BoarK, THE ANTrrRuST PARADoX 3-8 (1978) (arguing successfully that the law of
antitrust often made little sense and needed to he changed).
2. 15 U.S.C.  78j (1988). Section 10(b) provides:
March 1994 Vol. 62 No. 3

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