Abstract

http://ssrn.com/abstract=203394
 
 

Citations



 


 



Our Dysfunctional Insider Trading Regime


Saikrishna Prakash


University of Virginia School of Law


Columbia Law Review, Vol. 99, Pp. 1491-1550, 1999

Abstract:     
Although some have praised United States v. O'Hagan for bringing coherence and stability to the federal insider trader regime, the case actually underscores the regime's astonishingly dysfunctional nature. This Article explores three features of the regime. First, the federal insider trading regime that supposedly bans insider trading actually permits such trading. The conventional wisdom, that insiders must either disclose material, non-public information in their possession or abstain from trading their company's shares, is wrong. Instead, if insiders engage in Candid Insider Trading by declaring an intent to trade on material, non-public information prior to trading, they can avoid Rule 10b-5 liability. Second, the Supreme Court's construction of Rule 10b-5 broadens liability to all cases where a securities trade itself triggers a deception. Thus, whenever an insider engages in Deceptive Trading, she faces liability under Rule 10b-5, whether or not there is a misappropriation of material, non-public information. Third, this Deceptive Trading Theory explains liability in both the classical insider trading and the misappropriation scenarios. The first two problematic features arise out of the SEC's ongoing efforts to mitigate unfair informational asymmetries through the manipulation of a statute that prohibits deceptions. By cramming its goals into a statute that does not speak to its regulatory concerns, the SEC has created a regime that is nothing short of dysfunctional.

Accepted Paper Series


Not Available For Download

Date posted: February 3, 2000  

Suggested Citation

Prakash, Saikrishna, Our Dysfunctional Insider Trading Regime. Columbia Law Review, Vol. 99, Pp. 1491-1550, 1999. Available at SSRN: http://ssrn.com/abstract=203394

Contact Information

Saikrishna Prakash (Contact Author)
University of Virginia School of Law ( email )
580 Massie Road
Charlottesville, VA 22903
United States
Feedback to SSRN


Paper statistics
Abstract Views: 916

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.312 seconds