Publications

Implications and Considerations of Section 16 for Activist Investors

Fall 2005
Eleazer Klein
Activist Investing Developments - Fall 2005

An important provision of the securities laws that requires the attention of all investors, but especially activist investors, is Section 16 ("Section 16") of the United States Securities Exchange Act of 1934 (the "Exchange Act"). Section 16 was enacted by Congress to deter and punish insider trading. The application of Section 16 is onerous since it is a strict liability statute that imposes liability regardless of whether or not one actually has inside information or even access to it. While Section 16 is divided into numerous sections, investors are most affected by three parts.