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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
COURT CIRCUIT UNITED STATES APPEALS EXCHANGE HAGAN REHEARING PANEL INSIDER TRADING SECURITIES BANC MISAPPROPRIATION THEORY HOLDING UPHELD FILING FRIEND SUPPORTING UNITED STATES PETITION SUGGESTION MOTION SEEKING THREE-JUDGE PANEL EXCHANGE ACT BRYAN AUTHORITY CONNECTION TENDER HOLDING CONFLICTS VALIDITY ATTACK |
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNITED STATES V. JAMES HERMAN O HAGAN (8th Cir., Nos. 94-3174
and 94-3856)
LITIGATION RELEASE NO. 15049 / September 16, 1996
The General Counsel of the Securities and Exchange
Commission, Richard H. Walker, announced that the Commission
today submitted for filing a friend of the court brief in the
United States Court of Appeals for the Eighth Circuit, supporting
the United States petition for rehearing and suggestion for
rehearing en banc. The Commission filed a motion seeking leave
of the court to file the brief. In O Hagan, a three-judge panel
of the court of appeals rejected the misappropriation theory of
insider trading under Section 10(b) of the Exchange Act and the
Commission s Rule 10b-5. In so holding, the panel rejected the
decisions of the Second, Seventh and Ninth Circuit Courts of
Appeals, which have all accepted the misappropriation theory, and
followed the recent decision of the Fourth Circuit Court of
Appeals in United States v. Bryan.
The panel also invalidated, as beyond the Commission s
authority, the Commission s Rule 14e-3, which prohibits insider
trading in connection with tender offers. This holding conflicts
with the decisions of three other circuit courts--the Second,
Seventh, and Tenth Circuit Courts of Appeals--which have upheld
the validity of Rule 14e-3.
The Commission s brief urges the Eighth Circuit to rehear
the O Hagan case en banc and to follow the decisions of those
courts which have upheld the use of these important tools in the
Commission s attack on insider trading.
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