Ronald Bleakney, an officer at Natural Microsystems Corp. (NMC), a Section 12 corporation, directed NMC sales in North America, South America, and Europe. In November 1998, Bleakney sold more than...

Ronald Bleakney, an officer at Natural Microsystems Corp. (NMC), a Section 12 corporation, directed NMC sales in North America, South America, and Europe. In November 1998, Bleakney sold more than 7,500 shares of NMC stock. The following March, Bleakney resigned from the firm, and the next month, he bought more than 20,000 shares of its stock. NMC provided some guidance to employees concerning the rules of insider trading, and the corporation said nothing about potential liability with regard to Bleakney’s transactions. Richard Morales, an NMC shareholder, filed a suit against NMC and Bleakney to compel recovery, under Section 16(b) of the Securities Exchange Act of 1934, of Bleakney’s profits from the purchase and sale of his shares. (When Morales died, his executor Deborah Donoghue became the plaintiff.) Bleakney argued that he should not be liable because he relied on NMC’s advice. Should the court order Bleakney to disgorge his profits? Explain. Donoghue v. Natural Microsystems Corp., 198 F. Supp. 2d 487 (S.D.N.Y. 2002).