"Misappropriation theory" is a legal theory that can be used to prosecute someone for securities fraud. The theory is that if someone misappropriates (takes without permission) information that is not publicly known, and then uses that information to trade securities, they have committed fraud.
The theory is based on the idea that misappropriated information gives the trader an unfair advantage over other investors who do not have access to the information. This is known as "insider trading." Insider trading is illegal in the United States, and the misappropriation theory is one way that the government can prosecute someone for this crime.
The misappropriation theory was first used in the case of United States v. O'Hagan, in which the Supreme Court of the United States held that insider trading can be prosecuted under federal law even if the person who misappropriated the information does not breach a duty of trust or confidence.
The misappropriation theory has been used in several high-profile cases, including the prosecution of Raj Rajaratnam, a hedge fund manager who was convicted of insider trading in 2011.
What is Tipper Tippee theory?
Tipper Tippee theory is a form of market manipulation whereby a person or entity artificially inflates or deflates the price of a security or commodity by placing trades using false or misleading information. This type of manipulation is often perpetrated by individuals with inside information or access to privileged information.
What does misappropriation theory differ from classical theory? Misappropriation theory is a theory of securities fraud that is derived from common law principles. It is distinct from classical theory, which is based on the notion of material misrepresentation or omission.
Misappropriation theory holds that a person commits securities fraud if he or she uses material, nonpublic information to trade securities. The theory is premised on the idea that such insider trading is unfair to other investors who do not have access to the same information.
There are a number of key elements that must be present in order for misappropriation theory to apply. First, there must be a fiduciary relationship between the person who misappropriates the information and the person to whom the information belongs. Second, the person who misappropriates the information must do so for personal gain. And third, the misappropriated information must be material and nonpublic.
If even one of these elements is absent, then misappropriation theory does not apply. For example, if there is no fiduciary relationship between the parties, then there is no duty for the person who misappropriates the information to disclose it. Similarly, if the person who misappropriates the information does not do so for personal gain, then there is no incentive for him or her to engage in the conduct.
The most notable case involving misappropriation theory is United States v. O'Hagan, in which the U.S. Supreme Court held that misappropriation theory can be used to prosecute insider trading.
What is insider trading theory?
Insider trading theory is the legal theory that a person who trades securities while in possession of material, nonpublic information violates the fiduciary duty he or she owes to the company whose securities are being traded. The theory is based on the premise that a person who has access to material, nonpublic information has a duty to disclose that information or refrain from trading on it.
What is an example of misappropriation?
One example of misappropriation is when an employee uses their company's money for personal expenses. This could be something as small as using the company credit card to buy lunch, or something more significant like embezzling company funds. Misappropriation also includes using company resources for personal gain, such as using the company car for personal errands.
What do you mean by classical theory?
In general, the term "classical theory" refers to a body of ideas that stresses the importance of objective reality, rationality, and intellectual detachment. In the context of financial crime and fraud, classical theory typically refers to the idea that financial crimes are committed by rational individuals who carefully weigh the costs and benefits of their actions and make a conscious decision to commit a crime only if they believe that the potential benefits outweigh the risks. This theory contrasts with the idea that financial crimes are committed impulsively or by individuals who are not fully aware of the potential consequences of their actions.