The following is not meant to be legal advice.
Those attorneys familiar with Section 16(b) with all the Form 3, 4, or 5 filings with the SEC may also be familiar with Section 10b-5 and Rule 10b-5 when advising officers and directors on insider trading. However, attorneys working in house should be careful when discussing the personal questions of officers and directors because they represent the company, not the individuals.
Insider trading is committed when a person trades on material nonpublic information. A violation of Section 10b-5 is established if the following elements are proved in connection with the purchase or sale of a security: (1) material omissions or misrepresentation of fact; (2) scienter; (3) use of interstate commerce instrumentality; (4) reliance; and (5) damages.
A fact is material, if a reasonable investor would consider it in making an investment decision.
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