CHIARELLA Meaning and
Definition
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Chiarella is a term that holds significance in the field of corporate law, particularly in relation to insider trading. It refers to the United States Supreme Court case that gave rise to the establishment of the "classical theory" of insider trading liability.
In 1980, the Supreme Court deliberated on the case of Chiarella v. United States, wherein the defendant, Vincent F. Chiarella, worked in a printing capacity for a financial printer. While distributing confidential takeover documents, Chiarella deduced the identity of the acquiring companies and profited from trading their stocks. When his scheme was discovered, he was charged with insider trading violations.
The court notably ruled in favor of Chiarella, setting a precedent that reshaped the definition of insider trading. The case highlighted that liability for insider trading arises when an individual possesses material, non-public information about a company and subsequently trades its securities. The consequence of this case was the introduction of the "misappropriation theory" of insider trading, which includes individuals who acquire material non-public information due to their relationship with the issuer, regardless of whether they owe a fiduciary duty to the company.
Overall, the term "Chiarella" captures not only the Supreme Court case but also refers to the groundbreaking ruling that expands the scope of insider trading liability and clarifies the legal foundation upon which it stands.
Similar spelling words for CHIARELLA
