## Facts

- Macauley Whiting was a director of Dow Chemical Company.
- His wife, Helen Dow Whiting, held substantial Dow stock acquired by gift and inheritance.
- In September and November 1973, Helen sold a total of 29,770 shares for about $1.6 million at an average price of roughly $55–$56 per share.
- In December 1973, Macauley exercised a Dow stock option to buy 21,420 shares for $520,000 at $24.3125 per share.
- Macauley financed the option exercise with funds borrowed from Helen that came from the proceeds of her recent Dow stock sales.
- The couple’s financial affairs reflected coordinated management: shared financial advisors, joint tax returns, and financial planning directed toward common prosperity.
- Macauley sought a declaratory judgment that he was not liable to Dow under § 16(b) for short-swing profits based on matching Helen’s sales with his purchase; Dow counterclaimed to recover the profits.
- After a bench trial, the district court dismissed Macauley’s claim and entered judgment for Dow on its counterclaim.

## Issues

1. Whether a corporate director may be deemed to have “realized profit” under § 16(b) based on matching the director’s spouse’s sales with the director’s purchase of issuer securities within six months.

## Decision

- The Second Circuit affirmed the judgment for Dow.
- The court held that, on these facts, the director could be treated as having “realized profit” under § 16(b) by matching his wife’s sales with his own purchase within the statutory period.
- The court relied on the integrated economic character of the marital unit and the direct use of the wife’s sale proceeds to fund the director’s purchase.
- The court concluded that treating the transactions as matchable was consistent with § 16(b)’s remedial, prophylactic purpose and prevented circumvention through spousal trading.

## Legal Principles

- Section 16(b) is a strict-liability, prophylactic rule requiring insiders to disgorge to the issuer profits from any purchase and sale (or sale and purchase) within less than six months, without proof of actual misuse of inside information.
- “Profit realized” under § 16(b) may extend beyond formal title where economic reality shows coordinated trading and shared benefit within an insider’s family unit.
- Courts may treat an insider’s and spouse’s closely related transactions as matchable under § 16(b) when necessary to prevent easy evasion of the statute.
- Factual indicators supporting attribution include temporal proximity of trades, intra-family financing tied to the trades, and coordinated financial management demonstrating shared economic benefit.

## Conclusion

The court affirmed disgorgement under § 16(b), holding that a director could be deemed to have realized short-swing profit where his wife’s recent sales and his own option-based purchase within six months functioned as a coordinated family transaction producing a recoverable spread for the issuer.


Whiting v. Dow Chem. Co., 523 F.2d 680 (2d Cir. 1975)