Through a decision issued on February 14, 2017, the Third Chamber of the Brazilian Superior Court of Justice (STJ) determined that an organization whose manager, director or adviser commits insider trading shall not have the risk related to this activity covered by the Directors & Officers Liability Insurance (D&O insurance).

The discussion reached the Superior Court of Justice through the appeal 1.601.555/SP, filed by an ex-director of a company against the decision delivered by the São Paulo Court of Appeals which did not recognize the liability of an insurer to cover damages resulted from insider trading committed by a private individual who had a management position in the insured company.

Although D&O insurance aims to protect the property of high-level directors in case they are held liable for third-party damages, the coverage is limited to wrongful acts related to the position of management. However, according to the Superior Court of Justice, insider trading is an intentional act.

In conclusion, the groundings used by the Superior Court to justify its understanding are that: (i) insider trading is not a privilege of management positions; (ii) insider trading is an act defined as criminal in Brazilian legal order, and (iii) that “the insurance policy shall not enable irresponsibility”. It has been the first opportunity in which STJ decided on the subject.