Raymond L. Dirks

Raymond L. Dirks, a maverick Wall Street analyst who was accused of insider trading by securities regulators but then vindicated by the U.S. Supreme Court as a whistle-blower in a major fraud, died on Dec. 9 in Manhattan. He was 89.

His death was confirmed by his brother, Lee. He died in a nursing home, where he had lived since being diagnosed with dementia in 2018.

Mr. Dirks, whom Bloomberg News once called “arguably Wall Street’s most famous securities analyst,” figured in exposing one of the largest corporate frauds in American history.

He was a 39-year-old senior vice president of Delafield Childs, a research-oriented New York brokerage firm, when, in 1973, he received a tip from a former executive of Equity Funding Corporation of America that the firm had sold bogus policies to reinsurance companies, transactions that inflated its assets and earnings.

After conducting his own research into Equity, a Los Angeles-based company, Mr. Dirks told a Wall Street Journal reporter about the fraud and advised his clients who were institutional investors in Equity to dump their holdings.

Equity Funding collapsed, and several of its officers were prosecuted and imprisoned.

While Mr. Dirks was hailed as a folk hero in some quarters — The New York Times called him “flamboyant, fidgety and persistent” — the S.E.C. eventually censured him for insider trading and for violating anti-fraud provisions of the law by taking advantage of inside information and sharing it with investors. The investors sold their Equity shares before the information became public.

The threat of suspension by the commission and other potential penalties, coupled with the $1.5 million (in today’s dollars) that Mr. Dirks said he spent on legal fees from 1973 through 1983 as he challenged the S.E.C. in the federal court system, severely affected his earnings, his brother said.

That 10-year odyssey ended in 1983, when the Supreme Court overturned the S.E.C. censure, rejecting the agency’s interpretation of insider trading. (The interpretation had also been challenged by the Justice Department in a strongly worded brief.)

Writing for a 6-3 majority, Associate Justice Lewis F. Powell Jr. said that the commission’s broad definition of what constituted insider trading “threatens to impair private initiative in uncovering violation of the law.”

Liability, the court ruled, depended on whether the original source of the tip, or “tipper,” had breached his legal duty to the corporation’s shareholders in passing along the information.

Raymond Louis Dirks Jr. was born on March 1, 1934, in Fort Wayne, Ind. His father was an Army artillery officer who moved his family frequently as he was assigned from base to base and was later a salesman for a manufacturer of industrial-strength chains. Raymond’s mother, Virginia Belle (Wagner) Dirks, was a homemaker.