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The Mosaic Theory Of Materiality - Does The Illusion Have A Future?, Allan Horwich
The Mosaic Theory Of Materiality - Does The Illusion Have A Future?, Allan Horwich
Allan Horwich
THE MOSAIC THEORY OF MATERIALITY – DOES THE ILLUSION HAVE A FUTURE?
by Allan Horwich
Abstract
The mosaic theory of materiality provides that a corporate insider who discloses inconsequential information to an outsider who in turn uses that information to complete a material mosaic about the corporation does not violate Rule 10b-5 when trading based on that mosaic. The SEC and commentators support variants of the theory; the concept has never been directly applied in a reported case. Developing insider trading law tends to support the SEC’s qualification that Rule 10b-5 is implicated if the insider knows that the information …