Temporary Insider Law and Legal Definition
Temporary insider refers to a person or firm that receives inside information in the course of performing professional duties for a client. Temporary insider also refers to one who takes part in the control of corporation. Some examples of a temporary insider are:
1.An officer or director;
2.One who owns 10% or more of the corporation’s stock.
A temporary insider who is closely related to a debtor, that any deal between them will not be considered an arm’s length transaction. Hence, temporary insider will be subject to close scrutiny.
In SEC v. Obus, 2010 U.S. Dist. LEXIS 98895 (S.D.N.Y. Sept. 20, 2010), it was held that a temporary insider status is not established by merely alleging that a defendant acquired nonpublic corporate information, but only upon a finding that said defendant entered into a special relationship.
