Lillian is a second-year student at Washington and Lee and will be working at a civil litigation firm. She plans to work in the field of civil law. In this episode of Classroom Insiders, Lillian discusses how the cases of Chiarella and Carpenter impacted the SEC, and insider trading regulations. 
 

 
Chiarella came about when an employee of a financial printer company broke codes that concealed the names of companies involved in tender offers, then purchased shares from those companies before the bid was announced. In this case, Justice Powell introduced fiduciary duty as the reason individuals needed to disclose or abstain. Years before Chiarella, the SEC knocked down case after case of insider trading in favor of the government. Chiarella was Powell’s first opportunity to challenge the SEC’S policy of equal access, as well as crack down on the SEC’S attempt to broaden the interpretation of insider trading. Because Chiarella was not an employee, director, or officer of any of the companies whose stock was traded, there was no violation of securities law under that. 
 
Misappropriation had a part to play in the case of Carpenter and The Wall Street Journal columns. Information on what dates and times certain columns that affected the stock market would be published were traded from Winans to his clients via Carpenter. Justice Powell himself requested to hear the case with the intention of dismissing misappropriation theory as a whole. Justices Rehnquist and O’Connor joined his descent but Powell retired before the case could be heard by him. This caused the Supreme Court to be split on whether misappropriation was valid for liability being imposed on Carpenter. In Powell’s memos, it’s stated that he wanted to reject the theory of misappropriation for insider trading under 10B5.
 
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