Mark Cuban and insider trading

There is a great post here regarding the Cuban case by Stephen Bainbridge, William D. Warren Professor, UCLA School of Law; where Bainbridge makes a pretty good case that Cuban didn't have any legal obligation not to sell shares as he did. Bainbridge cites a Supreme Court decision regarding what individuals would have fiduciary obligations under the law in cases similar to Cuban's. Also, Professor Bainbridge has apparently written a book on insider trading(Securities Law: Insider Trading), so he seems to me to be a reasonably reliable authority and disinterested third party. The linked post is a great read. I'm convinced that Cuban could win his case.

In the Bainbridge post I linked, he cites this precedent that some might find interesting:

"The most relevant precedent here would be Walton v. Morgan Stanley & Co.,623 F.2d 796 (2d Cir.1980). Morgan Stanley represented a company considering acquiring Olinkraft Corporation in a friendly merger. During exploratory negotiations Olinkraft gave Morgan confidential information. Morgan’s client ultimately decided not to pursue the merger, but Morgan allegedly later passed the acquired information to another client planning a tender offer for Olinkraft. In addition, Morgan’s arbitrage department made purchases of Olinkraft stock for its own account. The Second Circuit held that Morgan was not a fiduciary of Olinkraft: “Put bluntly, although, according to the complaint, Olinkraft’s management placed its confidence in Morgan Stanley not to disclose the information, Morgan owed no duty to observe that confidence.” Although Walton was decided under state law, it has been cited approvingly in a number of federal insider trading opinions. Hence, I believe the cases finding liability based on a mere contractual duty of confidentiality are wrongly decided."

So JP Morgan was given a free pass for trading against a client...