Steginsky v. Xcelera Inc., No. 13-1327 (2d Cir. 2014)Annotate this Case
Plaintiff, a former minority shareholder of Xcelera, filed securities fraud claims alleging that Xcelera insiders purchased Xcelera stock by making a tender offer through a shell corporation without disclosing any information about Xcelera's financial state. The district court dismissed plaintiff's claims and she appealed. The court held that the duty of corporate insiders to either disclose material nonpublic information or abstain from trading was defined by federal common law and applied to unregistered securities. Accordingly, the district court erred in dismissing plaintiff's insider trading claims under sections 10(b), 20(a), and 20A(a) of the Securities Exchange Act, 15 U.S.C. 78a et seq. The court vacated the dismissal of those claims and remanded for further proceedings. The court affirmed as to the dismissal of plaintiff's market manipulation claims and her section 14(e) insider trading claims.