Eastman Kodak Co apparently believes in the adage that the best defense is a strong offense.
, a 2001 appellate ruling. In both of those cases, New York asserted that the defendants had acted with fraudulent intent, or scienter, when they traded with inside information.
Case law interpreting the Martin Act, remember, holds that the law generally imposes strict liability. So here’s where Kodak’s defense could get interesting. Insider trading is based on the idea that corporate insiders’ fiduciary duties preclude them from using confidential information to their own advantage . Under federal law, insider trading requires proof of a breach of fiduciary duty .
“The adoption of what can only be seen as a strict liability or negligence-based liability regime to govern insider trading would inhibit legitimate conduct and is unnecessary in light of the strong federal regulatory regime that addresses wrongful and knowing insider trading,” Strine wrote. Can New York’s AG ward off that potential problem by alleging fraudulent intent? Not credibly, according to Kodak’s public statement.