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Willful Blindness, Plausible Deniability, and Tippee Liability: SAC, Steven Cohen, and the Court's Opinion in Dirks

Is the principal of a securities trading firm able to remain ignorant about the source of information used in trading on the principal's behalf and avoid liability for insider trading under U.S. law? This short essay explores that question using the SAC Capital Advisors, L.P. and Steven Cohen as an example case, reflecting on the law established by the Supreme Court in its opinion in Dirks v. SEC in light of both the Second Circuit opinion in SEC v. Obus and changes, occasioned by Regulation FD, in the nature of securities analysts’ work and the overall information entrepreneurialism of market intermediaries. Ultimately, issues identified in this context afford us the opportunity to take another look at U.S. insider trading law as a matter of policy.