Gibbons v. Malone, No. 11-3620 (2d Cir. 2013)
Annotate this CasePlaintiff appealed the district court's dismissal of his complaint for failure to state a viable section 16(b) disgorgement claim pursuant to the Securities Exchange Act of 1934, 15 U.S.C. 78p(b). At issue was whether the "short-swing profit rule" applied when a corporate insider sold shares of one type of stock issued by the insider's company and purchased shares of a different type of stock in that same company. The court held, absent any guidelines from the SEC, that section 16(b) did not apply to transactions of this sort involving separately traded, nonconvertible stocks with different voting rights. Accordingly, the court affirmed the judgment.
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