Dirks (D) was an officer of a New York broker-dealer firm who specialized in providing investment analysis of insurance company securities to institutional investors. D received information from Ronald Secrist, a former officer of Equity Funding of America. Secrist alleged that the assets of Equity Funding were vastly overstated as the result of fraudulent corporate practices. Secrist urged D to verify the fraud and disclose it publicly. D began an investigation. D openly discussed the information he had obtained with a number of clients and investors. Some of these persons sold their holdings of Equity Funding securities, including five investment advisers who liquidated holdings of more than $16 million. During the 2-week period in which D pursued his investigation and spread word of Secrist's charges, the price of Equity Funding stock fell from $26 per share to less than $15 per share. Trading was halted and lo and behold the SEC (P) filed a complaint against Equity Funding. Equity Funding immediately went into receivership. To 'reward' D, P began an investigation into D's role in the exposure of the fraud. The SEC found that D had aided and abetted violations of § 17(a) of the Securities Act of 1933, 48 Stat. 84, as amended, 15 U.S.C. § 77 q(a), 5 § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U.S.C. § 78j(b), 6 and SEC Rule 10b-5, 17 CFR § 240.10b-5 (1983), by repeating the allegations of fraud to members of the investment community who later sold their Equity Funding stock. It held: Where `tippees' - regardless of their motivation or occupation - come into possession of material `corporate information that they know is confidential and know or should know came from a corporate insider,' they must either publicly disclose that information or refrain from trading.' Because D 'played an important role in bringing [Equity Funding's] massive fraud to light,' the SEC only censured him. D sought review in the Court of Appeals. It affirmed, and the Supreme Court granted certiorari.

This section contains the nature of the case and procedural background.

The legal issues presented in this case will be displayed here.

The court's holding and decision will be displayed here.

Legal analysis from Dean's Law Dictionary will be displayed here.