This comment explores the split of authority on whether privity and reliance prerequisites should be imposed on private recovery for insider trading in the market under rule 10b-5. The author starts by discussing the Second Circuit's view, which eliminates the privity requirement and relaxes the reliance requirement, and the view's advantages and disadvantages. Next, the author discusses the Sixth Circuit's view, which requires proof of direct causation in fact and privity. The author concludes that in order to protect people from securities fraud and hold violators liable for rule 10b-5 violations, the rule must not be conditioned on privity and reliance in impersonal market transactions.
Clyde C. Greco Jr.,
Private Rule 10b-5 Recovery for Open Market Insider Trading: The Propriety of Privity and Reliance Requirements,
San Diego L. Rev.
Available at: https://digital.sandiego.edu/sdlr/vol15/iss4/6