Quote from JSL_Capital:
Thanks for the article. Here though I think the key word is the "tippee" (the sublink to the case involved http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=search&court=US&case=/us/000/96-842.html). For instance, using your example, a waiter who overhears an M&A activity at the table is not directly being "tipped" by an insider so he wouldn't be considered a "tippee". The following paragraph's definition of outsider is an extension of the word tippee and not necessarily includes the ever-mentioned general public who happens to accidentally stumbles upon the material non-public information
Still waiting for the poor waiter who broke the law. . .
Thanks all of you (esp. wareco & bylo) for the articles and lively arguments, I guess this is my Law & Order night.
The waiter in your example incurs no criminal or civil liability. He inadvertently learned of material non-public information from an insider. The insider did not intend to disclose the information to the waiter, and obtained no direct or indirect benefit from its disclosure.
As the Supreme Court court stated in the Dirks case in determining whether there has been a breach of fiduciary duty "Thus, the test is whether the insider personally will benefit, directly or indirectly, from his disclosure. Absent some personal gain, there has been no breach of duty to stockholders. And absent a breach by the insider, there is no derivative breach"
The court went on to say, "The elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend. The tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient."