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The remainder of section 16(b) provides that an issuer or any
shareholder of the issuer may bring suit against an insider to
recover any profit realized by the insider on any purchase and
sale, or any sale and purchase, of any equity security of such
issuer within any period of less than 6 months.
Section 16(b), the so-called short-swing profit recovery
provision, is a prophylactic and strict liability measure “under
which an insider’s short-swing profits can be recovered
regardless of whether the insider actually was in possession of
material, non-public information.” Ownership Reports and Trading
By Officers, Directors and Principal Security Holders (Ownership
Reports), Exchange Act Release No. 34-28869, 56 Fed. Reg. 7242,
7243 (Feb. 21, 1991); see Levy v. Sterling Holding Co., LLC, 314
F.3d 106, 109-111 (3d Cir. 2002); Magma Power Co. v. Dow Chem.
Co., 136 F.3d 316, 320 (2d Cir. 1998). Section 16(b) applies to
transactions involving derivative securities such as stock
options. At Home Corp. v. Cox Commcns. Inc., 446 F.3d 403 (2d
Cir. 2006); Magma Power Co. v. Dow Chem. Co., supra at 321; SEC
rule 16a-1(c) and (d), 17 C.F.R. sec. 240.16a-1(c) and (d)
(2006).
The elements of a claim under section 16(b) of the Exchange
Act are “(1) a purchase and (2) a sale of securities (3) by an
officer or director of the issuer or by a shareholder who owns
more than ten percent of any one class of the issuer’s securities
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