Feder v. Frost
United States Court of Appeals for the Second Circuit
220 F.3d 29 (2000)
Philip Frost (defendant) was Chairman and CEO of IVAX, and separately controlled FNLP (which owned 12.8% of IVAX) and NAVI (in which Frost and FNLP together held over 50%). In 1995–96, Frost and FNLP bought IVAX shares while NAVI, the entity Frost and FNLP controlled, sold IVAX shares at a profit. Feder (plaintiff) sued Frost for insider trading under Section 16(b) of the Exchange Act, arguing Frost was a beneficial owner of more than ten percent of IVAX and was therefore obligated to report these transactions. The district court ruled for Frost, and Feder appealed.
Whether a person with a direct or indirect pecuniary interest in ten percent or more of a security is under a reporting obligation designed to prevent insider trading.