United States Court of Appeals for the Second Circuit
910 F.2d 1028 (1990)
In 1990, Rorer Group, Inc. (Rorer), a Pennsylvania pharmaceutical company, entered into a merger with Rhone-Poulenc, S.A. (Rhone), a French corporation. Prior to this merger, Unifund SAL (Unifund) (defendant), acquired over $2 million in Rorer stock. It sold this stock immediately after the announcement of the merger, earning a substantial profit as a result. Two days after the merger announcement, the Securities and Exchange Commission (SEC) (plaintiff) brought suit against Unifund and several other defendants for insider trading, in violation of § 10(b) of the Exchange Act. The SEC’s complaint did not name the source of the tip, as is customary in insider trading cases to prove that nonpublic information has been distributed. The SEC also obtained a preliminary injunction from the district court, prohibiting Unifund from engaging in future securities law violations, and freezing its accounts indefinitely. The district court cited Unifund’s substantial profit after the merger in issuing the preliminary injunction. Unifund appealed the preliminary injunction to the Second Circuit Court of Appeals.
Rule of Law
Holding and Reasoning (Newman, J.)
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