Dirks v. Securities and Exchange Commission (1982)
- Docket
- 82-276
- Decided
- 1982-01-01
Summary
Question: Did Dirks’ actions violate the antifraud provisions of the federal securities laws? Conclusion: No. Justice Lewis F. Powell, Jr. delivered the opinion of the 6-3 majority. The Court held that the duty to disclose information arises from a financial relationship with one of the parties, not just the possession of information. The Court also held that an insider is only liable for inside trading when he makes a profit on the information before disclosing. Because Dirks did not have a financial relationship with Equity Funding, nor did he make a profit from the information, he neither had a duty to disclose nor did he violate the antifraud provisions of the federal securities laws. In his dissenting opinion, Justice Harry A. Blackmun argued that Dirks served as a proxy to provide insider information to people who did have a financial interest in Equity Funding and were able to act on his information. By fulfilling this role, he is liable. He also argued that that the majority’s opinion essentially rewards Dirks for participating in the affair, which is counterproductive for the purposes of enforcing the federal securities acts. Justice William J. Brennan, Jr. and Justice Thurgood Marshall joined in the dissent.