Under the misappropriation theory, deceptive trading is performed by an outsider who owes no duty to shareholders but does owe some type of duty to the source of the information.

Question

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Misappropriation theory holds that a person commits fraud when they misappropriate confidential information for securities trading purposes, in breach of a duty owed to the source of the information, not necessarily to the shareholders of the traded company.

Under the Misappropriation Theory, Deceptive Trading Is Performed by an Outsider