Second Circuit Dismisses Short-Swing Profit Claim
January 10, 2013
By KEVIN P. BROUGHEL
On January 7, 2013, the Second Circuit held, in a case of first impression, that Section 16(b) of the Securities Exchange Act of 1934, more commonly known as the "short-swing profit rule," did not apply to a corporate insider transaction involving shares of two different classes of stock of the same issuer. The case not only clarifies what transactions fall within the scope of Section 16(b) but also suggests that the Second Circuit will not apply its own interpretive gloss to the securities laws absent SEC direction.