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Abstract

As the first federal court decision to hold that insider trading represented a violation of the federal securities laws, the historical importance of SEC v. Texas Gulf Sulphur Co. is clear. However, its current relevance may not be so clear. This is because while there are some aspects of Texas Gulf that have endured and remain a fixture of federal insider trading jurisprudence, the Supreme Court has firmly repudiated the normative rationale for in- sider trading articulated by Texas Gulf. This essay contends that this repudiation has important descriptive and normative implications. Perhaps most importantly, this essay contends that Texas Gulf continues to be important because of this repudiation. The rejection of the normative rationale underlining Texas Gulf serves as an important reminder that legal doctrine is not the product of inevitability, but of deliberate choices. It is also a reminder that theory matters. Theory shapes the choices we make and the evolution of doctrine that stems from those choices. Without appreciating the significance of the rejected normative theory that is Texas Gulf, current students and consumers of insider trading law may view securities law, and the regime it support, as value-neutral. Instead, Texas Gulf represents a critical reminder that our securities regime is in fact a dynamic re- flection of values accepted and values rejected.

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