Misappropriation Theory

DEFINITION of 'Misappropriation Theory'

A perspective that defines the act of stealing confidential information from an employer and then trading securities based on the misappropriated insider knowledge. In the United States, a person guilty according to the misappropriation theory will likely be convicted of insider trading.

BREAKING DOWN 'Misappropriation Theory'

The misappropriation theory gained prominence in the Supreme Court's conviction of James H. O'Hagan. O'Hagan was an attorney who acted on insider information regarding a takeover bid for Pillsbury. The United States versus O'Hagan was a watershed case for the theory, defining its validity.

This take on insider trading expands the traditional view of what constitutes guilt. Instead of looking only at people who trade their own companies' shares based on stolen information, the theory extends to those who use the knowledge to profit in any corporation.

RELATED TERMS
  1. Fiduciary Abuse

    Describes a situation in which an individual who is legally appointed ...
  2. Takeover Bid

    A type of corporate action in which an acquiring company makes ...
  3. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  4. Insider Trading

    The buying or selling of a security by someone who has access ...
  5. Defalcation

    1. Combining two or more debts to create one total debt. Defalcation ...
  6. Insider

    A director or senior officer of a company, as well as any person ...
Related Articles
  1. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  2. Economics

    Defining Illegal Insider Trading

    The better you understand why insider trading can be criminal, the better you'll understand how the market works.
  3. Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  4. Options & Futures

    When Insiders Buy, Should Investors Join Them?

    Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for.
  5. Options & Futures

    Keeping An Eye On The Activities Of Insiders And Institutions

    These transactions reveal much about a stock. We go over what to consider and where to find it.
  6. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  7. Personal Finance

    What it Takes to Get a Green Card

    Grounds for getting a green card include having family members in the U.S., being a certain type of refugee or specialized worker, or winning a lottery.
  8. Career Education & Resources

    Laws & Regulations To Know Before Changing the Name of Your Business

    Discover some of the most important steps you need to take after making a decision to change your legally established business name.
  9. Personal Finance

    Passport Procrastinators: This Year, Renew Early!

    Millions of passports issued nearly 10 years ago when the Western Hemisphere Travel Initiative became law are expiring. Expect backlogs; leave extra time.
  10. Economics

    Why Enron Collapsed

    Enron’s collapse is a classic example of greed gone wrong.
RELATED FAQS
  1. What is the Writ of Mandamus?

    A writ of mandamus is a court order issued by a judge at a petitioner’s request compelling someone to execute a duty he is ... Read Full Answer >>
  2. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  3. Can the IRS audit you after a refund?

    The U.S. Internal Revenue Service (IRS) can audit tax returns even after it has issued a tax refund to a taxpayer. According ... Read Full Answer >>
  4. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  5. What happens if property is wrongfully escheated?

    If your financial accounts, such as bank, investment or savings accounts, are declared dormant and the managing financial ... Read Full Answer >>
  6. How do financial advisors help you avoid escheatment?

    Financial advisors can help you avoid the escheatment of your financial assets by regularly reviewing all of your accounts, ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center