(even if unintentional);
2) Update statements that have become materially misleading by subsequent events, 3) Correct material errors in statements by others (eg, analyst's report) about the corp, but only if the corp was involved in the preparation of the statements; and
4) Correct inaccurate rumors resulting from leaks by the corp or its agents.
10.TIPPEE AND TIPPER LIABILITY - a person, not an insider, who trades on info received from an insider is a tippee and may be liable under rule 10b-5 if he received info through an insider who breached fiduciary duty in giving the info, AND the tippee knew or should have known of the breach (Dirks)
a) Breach of Insider's Fiduciary Duty - whether an insider's fiduciary duty was breached depends largely on whether the insider communicated the info to realize the gain or advantage. Accordingly, tips to friends or relatives and tips that are a quid pro quo for a past or future benefit from the tippee result in fiduciary breach. Note that if a tippee is liable, so is the tipper.
11. "TEMPORARY INSIDERS" - corporate info legitimately revealed to a professional or consultant (eg, accountant) working for the corp may make this person a fiduciary of corp
12.AIDERS AND ABETTORS - liability cannot be imposed solely because a person aided and abetted the violation of the rule.
13.APPLICATION OF RULE 10B-5 TO BREACH OF FIDUCIARY DUTY BY DIRECTORS, OFFICERS, AND CONTROLLING SHAREHOLDERS. p> a) Ordinary Mismanagement - a breach of fiduciary duty not involving misrepresentation, nondisclosure, or manipulation does NOT violate rule 10b-5;
b) Misrepresentation or Nondisclosure - if this is the basis of a purchase from or sale to the corp by a dir or officer, the corp can sue the fiduciary under rule 10b-5 and also for breach of fiduciary duty. If the corp doesn't sue, a minority sh can maintain a derivative suit on the corporations behalf.
c) Purchase or Sale By Controlling Shareholder - when a corp purchases stock from or sells stock to a controlling sh at an unfair price, and material facts aren't disclosed to minority shs, a derivative action may lie if the nondisclosure caused a loss to the minority shs. The plaintiffs must establish causation by showing that an effective state remedy (eg, injunction) was foregone because of nondisclosure.
14.BLUE CHIP RULE - PRIVATE PLAINTIFF - a plaintiff can bring a private cause of action only if he actually purchased or sold the relevant securities. "Sale" includes an exchange of stock for assets, mergers and liquidations, contracts to sell stock, and pledges. The SEC can bring action under rule 10b-5 even though it has neither purchased or sold securities.
15.DEFENSES
a) Due Diligence - if a plaintiff's reliance on a misrepresentation or omitted fact could have been prevented by his exercise of due diligence, recovery may be barred. Mere neg...
