Securities and Exchange Commission v. Rocklage
United States Court of Appeals for the First Circuit
470 F.3d 1 (2006)
Cubist CEO Mr. Rocklage regularly shared confidential company information with his wife Mrs. Rocklage (defendant) on the understanding she would keep it confidential, but she had a standing arrangement to pass such information to her brother Beaver, a Cubist shareholder; when Mr. Rocklage told her a drug had failed a clinical trial, she told him she planned to inform Beaver despite his objection, did so anyway, and Beaver sold his stock before the news became public. The SEC (plaintiff) sued Mrs. Rocklage for securities fraud, and she moved to dismiss for failure to state a claim.
Whether, under the misappropriation theory of securities fraud, a defendant's disclosure to the source of confidential information of an intent to trade on or disclose it cures any deception used to originally acquire the information.