This Note advocates that courts should permit tipper defendants to assert the in pari delicto defense in private 10b-5 cases against tippee plaintiffs unless one of the first three exceptions to the analytical framework applies. Part II of this Note discusses the purpose and application of the in pari delicto defense and the four situations in which courts have rejected it. Part II also illustrate show courts analyze the in pari delicto defense in contract, anti-trust, and non-10b-5 securities cases. Part III provides a general background on the purpose of the Securities and Exchange Act of 1934 and rule 10b-5, and analyzes the current split among federal circuit courts on the application of the in pari delicto defense in rule 10b-5 actions. Part IV concludes that courts should leave the parties to the illegal agreements undisturbed and should not apply the residual exception to disallow the defense in 10b-5 actions.When one of the first three exceptions to the defense does apply, however, courts should continue to allow plaintiff tippees to recover against tipper defendants who have given the tippees false inside information.
Mark G. Strauch,
Rule 10b-5-Application of the In Pari Delicto Defense in Suits Brought Against Securities Brokers by Customers Who Have Traded on Inside Information,
37 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol37/iss3/3