Delaware and Insider Trading: The Chancery Court Rejects Federal Preemption Arguments of Corporate Directors

摘要

For decades, the federal courts have applied Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 to combat insider trading. However, the bar on insider trading has its roots in state corporate law, specifically, in the common law doctrine of the fiduciary duty of loyalty. The history of the judicial regulation of insider trading under Delaware law and its interplay with the federal regulatory scheme are the subject of the Delaware Court of Chancery's recent decision in Pfeiffer v. Toll, in which the court upheld shareholder derivative claims against eight corporate directors for insider trading under state law.