True or False with explanations:

Dirks v. SEC, 463 U.S. 646 (1983) (Mallor 15^th Ed. p. 1172).

On March 6, 1973, Raymond Dirks, a security analyst in a New York brokerage firm, received nonpublic information from Ronald Secrist, a former officer of Equity Funding of America, a seller of life insurance and mutual funds. Secrist alleged that the assets of Equity Funding were vastly overstated as the result of fraudulent corporate practices. He also stated that the SEC and state insurance departments had failed to act on similar charges of fraud made by Equity Funding employees. Secrist urged Dirks to verify the fraud and to disclose it publicly. Dirks visited Equity Funding's headquarters in Los Angeles and interviewed several officers and employees of the corporation. The senior management denied any wrongdoing, but certain employees corroborated the charges of fraud. Dirks openly discussed the information he had obtained with a number of his clients and investors. Some of these persons sold their holdings of Equity Funding securities. Dirks urged a Wall Street Journal reporter to write a story on the fraud allegations. The reporter, fearing libel, declined to write the story. During the two-week period in which Dirks investigated the fraud and spread the word of Secrist's charges, the price of Equity Funding stock fell from $26 per share to less than $15 per share. The New York Stock Exchange halted trading in Equity Funding stock on March 27. On that date, Dirks voluntarily presented his information on the fraud to the SEC. Only then did the SEC bring an action for fraud against Equity Funding. Shortly thereafter, California insurance authorities impounded Equity Funding's records and uncovered evidence of the fraud. On April 2, The Wall Street Journal published a front-page story based largely on information assembled by Dirks. Equity Funding immediately went into receivership. The SEC brought an administrative proceeding against Dirks for violating Rule 10b-5 by passing along confidential inside information to his clients. The SEC found that he had violated Rule 10b-5, but it merely censured him, since he had played an important role in bringing the fraud to light. Dirks appealed to the Court of Appeals, which affirmed the judgment. Dirks then appealed to the Supreme Court. E 1. Because the shares of Equity Funding traded on the New York Stock Exchange, a secondary market, Equity Funding must routinely provide its shareholders with updated information on the performance of the company in its annual report, periodic reports and proxy solicitations. 2. Secrist did not violate his duty to the corporation's shareholders by providing information to Dirks, because, as a former officer, he no longer owes fiduciary duties to Equity Funding, and he received no monetary or personal benefit for revealing the information to Dirks. 3. As a security analyst in a New York brokerage firm, Dirks owes a fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients. 4. If at the time he passed the information to Dirks, Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee. 5. Dirks cannot have violated Rule10b-5 unless: (a) he gained access to inside information as an Equity Funding insider, and (b) it is unfair to permit him to gain benefits from that information without disclosing it