“Tippee” Liability Extended to Remote Third Parties: <i>Schein v. Chasen</i>, 478 F.2d 817 (2d Cir. 1973)

Schein v. Chasen, utilizing common law principles, held that one who is given a "tip" by a corporate insider also acquires the insider's fiduciary duties to the corporation. As a result, the "tippee" must refrain from trading in the corporation's securities until the information is publicly disclosed. The purpose of the rule is to prevent the unfair use of information which is not available to the general public. The legal issues raised by Schein with respect to the obligations of persons other than corporate insiders who acquire nonpublic corporate information have important implications for the securities industry and the investing public.