1. Are both insider trading theories needed to fulfill the 1934 Act’s desire to keep the markets “honest”?
2. Both insider trading theories depend heavily on fiduciary relationships. Contrast the parties in the fiduciary relationships under the “classical” and “misappropriation” theories.
3. Would it have made any difference if O’Hagan had established with his broker, long before this trading, a portfolio diversification plan such that, pursuant to the plan, the identical trading would have occurred?
O’Hagan was a partner in the law firm of Dorsey & Whitney. In July 1988, Grand Metropolitan retained the firm to represent it in a tender offer for Pillsbury stock. O’Hagan did no work on this matter. In August, O’Hagan began purchasing Pillsbury stock options. He also purchased Pillsbury stock at $39. When the tender offer was announced, the price rose to $60. O’Hagan sold his options and stock, making a profit of $4.3 million. He used the profits to conceal his previous embezzlement of unrelated client trust funds.