Can a company recover short-swing trading profits from an insider who bought and sold its stock within six months?
Section 16(b) lets an issuer recover any profit an officer, director, or 10% beneficial owner realizes from a purchase and sale (or sale and purchase) of the issuer's equity securities within any period of less than six months.
The answer
The recovery right
15 U.S.C. § 78p(b) makes any profit realized by a beneficial owner, director, or officer from a purchase and sale, or sale and purchase, of the issuer's equity securities within any period of less than six months recoverable by and inurable to the issuer, irrespective of the insider's intention. Suit may be brought by the issuer, or by a security holder on the issuer's behalf if the issuer fails or refuses to bring suit within sixty days after request.
Strict liability
The remedy does not turn on misuse of inside information or bad intent. Any matchable purchase and sale inside the six-month window produces recoverable profit, which is why Section 16(b) operates as a near-mechanical disgorgement rule.
The judged input
What the AI drafted
Submitted to the judgeThis is an excerpt from a draft securities-disclosure liability memo — the kind of work product a lawyer generates with a legal-AI drafting tool, then has to stand behind. Kingsfield does not write it; it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.
The judge ruled on every citation as the draft used it — it accepted 15 U.S.C. § 78p(b) and rejected 15 U.S.C. § 78m(d). Here is why.
The verdict
How Kingsfield ruled
Ruled 2026-06-23Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.
The draft claimed: Any profit realized by a beneficial owner, director, or officer from any purchase and sale, or sale and purchase, of the issuer's equity securities within any period of less than six months is recoverable by and inures to the issuer, irrespective of the insider's intention in entering into the transaction.
“For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) or a s”
Cite found; proposition supported by the cited text.
The draft claimed: Section 13(d) is the Exchange Act provision under which an issuer recovers short-swing profits realized by an insider from a purchase and sale of equity securities within a six-month period.
Cite found, but the cited text does not support the claim. 15 U.S.C. 78m(d) is the Williams Act beneficial-ownership reporting requirement, obligating a person who acquires more than 5 percent of a class of registered equity securities to file a Schedule 13D disclosure; the short-swing-profit recovery remedy is in 15 U.S.C. 78p(b). Regenerate with the correct authority.
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Connect the Judge See the architectureThis page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.