a. What does §10(b) prohibit?
b. What does that statute have to do with insider trading?
c. What is wrong with insider trading?
d. What did O'Hagan do wrong?
e. How did he learn this?
f. Was there anything wrong with buying Pillsbury stock?
g. Would it have been clearly illegal to buy Pillsbury stock if O'Hagan's firm had represented Pillsbury?
h. Why is it different for O'Hagan to purchase stock in Pillsbury when he works (indirectly) for Grand Met?
i. What did the Supreme Court hold this time?
Grand Met hired the law firm of Dorsey & Whitney to represent it in a takeover of Pillsbury. James O'Hagan was a partner in Dorsey & Whitney who did not work for Grand Met but who did purchase significant amounts of Pillsbury stock during this period. After Grand Met publicly announced its takeover attempt, O'Hagan sold his stock at a profit of more than $4.3 million. A jury convicted O'Hagan of misappropriation in violation of §10(b) and the judge sentenced him to prison. The appeals court reversed, ruling that misappropriation is not a violation of §10(b). The Supreme Court granted certiorari.