Rereading Cady, Roberts: The Ideology and Practice of Insider Trading Regulation

Abstract:     
William Cary's opinion in the Cady, Roberts case is seminal in the development of modern insider trading regulation. This paper revisits three ideas that were important to the decision and that remain contested today. First, it explores the "why regulate?" question, to which Cary replied (as Justice Ginsburg recently did once again in O'Hagan) in terms of the familiar investor confidence rationale. The paper considers, in a not unsympathetic way, the role of insider trading regulation as a useful myth within the structure of seccurities regulation. Second, it revisits the "possession versus use" question raised in Cady, Roberts and so many cases since. Third, it addresses the question of why insider trading regulation for so long has avoided definition and rulemaking in favor of open ended standards.

Accepted Paper Series