The Missing Link between Insider Trading and Securities Fraud

5 Pages Posted: 13 Feb 2008

See all articles by Richard A. Booth

Richard A. Booth

Villanova University Charles Widger School of Law; ECGI

Multiple version iconThere are 2 versions of this paper

Abstract

Securities fraud and insider trading have become well established as independent causes of action. But the connection between securities fraud and insider trading matters. A securities fraud class action should be dismissed for failure to state a claim unless it appears that insiders have used the occasion to misappropriate stockholder wealth. There are two related reasons: First, rational investors diversify, making securities fraud without misappropriation a zero-sum game. Second, securities fraud class actions generate deadweight losses for diversified investors.

Keywords: SEC, SEC v. Texas, stocks, litigation, insider trading, securities fraud, SLUSA, misappropriation, policy, corporate crime, white collar crime

JEL Classification: E42, G18, L41

Suggested Citation

Booth, Richard A., The Missing Link between Insider Trading and Securities Fraud. Regulation, Vol. 30, No. 4, Winter 2007-2008, Available at SSRN: https://ssrn.com/abstract=1092926

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Richard A. Booth

Villanova University Charles Widger School of Law ( email )

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HOME PAGE: http://www1.villanova.edu/villanova/law/staffadmin/Faculty%20Directory/biodetail.html?mail=booth@law

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HOME PAGE: http://www1.villanova.edu/villanova/law/academics/faculty/Facultyprofiles/RichardBooth.html

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