Volume 73, Number 4

October 1998

The Uneasy Doctrinal Compromise of the Misappropriation Theory of Insider Trading Liability

M. Breen Haire

This Note examines the nature of the doctrinal compromise that the misappropriation theory represents. It focuses on the uneasy relationship among the three doctrinal models and argues that, in fact, the misappropriation theory marks a fundamental departure from the Supreme Court’s more sensible fiduciary duty analysis, and differs in no meaningful way from an equal access regime of insider trading liability. Since the wrongful activity to which the misappropriation theory attaches liability is so distantly related to the securities trading at issue, any claim that it retains the fiduciary duty framework is simply implausible. Like the equal access model, the theory stretches applicable statutory provisions beyond recognition and cannot be reconciled with the Supreme Court’s past interpretation of these provisions.