Securities and Exchange Commission v. Texas Gulf Sulphur Co.
United States Court of Appeals for the Second Circuit
401 F.2d 833 (2d Cir. 1968)
After Texas Gulf Sulphur (TGS) discovered a rich mineral deposit in Canada and downplayed the find publicly to keep land-acquisition costs low, TGS's secretary and an engineer (defendants) bought company stock during the four days before the official announcement of a major copper-ore strike, and a TGS director (defendant) ordered shares immediately after the public announcement, with his broker son-in-law also buying for himself and clients; the SEC (plaintiff) sued, and the district court found the secretary and engineer liable but dismissed claims against the director, who traded only after public disclosure.
Whether individuals with knowledge of material inside information must either disclose it publicly or abstain from trading in the securities while that information remains undisclosed.