concluded, in pertinent part, that to establish liability under the misappropriation theory of insider trading in the absence of another legal duty to refrain from trading on or otherwiseusing material, nonpublic information for personal benefit (such as a duty arising from afiduciary relationship), the SEC could rely on an express or implied agreement.
, 634F.Supp.2d at 725 (“The court therefore concludes that a duty sufficient to support liabilityunder the misappropriation theory can arise by agreement absent a preexisting fiduciary orfiduciary-like relationship.”). The court also held that the agreement “must consist of morethan an express or implied promise merely to keep information confidential.”
Therecipient of the information “must agree to maintain the confidentiality of the information
not to trade on or otherwise use it.”
The court assessed whether the SEC hadadequately pleaded that “Cuban entered into an express or implied agreement withMamma.com not to disclose material, nonpublic information about the PIPE offering
notto trade on or otherwise use the information.”
at 727. The court concluded that, “whilethe SEC adequately plead[ed] that Cuban entered into a confidentiality agreement, it [did]not allege that he agreed, expressly or implicitly, to refrain from trading on or otherwiseusing for his own benefit the information the CEO [of Mamma.com] was about to share.”
see also id.
(“[T]he complaint asserts no facts that reasonably suggest that theCEO intended to obtain from Cuban an agreement to refrain from trading on the informationas opposed to an agreement merely to keep it confidential.”). The court dismissed the SEC’saction with leave to replead,
at 731, although the SEC opted to appeal rather than amend,
at 732.- 3 -
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