Compensation for Insider Trading: Who Should be Eligible Claimants?

32 Pages Posted: 24 Jul 2008

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Date Written: July 23, 2008

Abstract

Determining the proper class of plaintiffs that might be allowed to sue an insider trader for damages has been a very difficult task. The article will first discuss the development of three main approaches to the issue, namely the privity approach, the contemporaneous trader approach and the nondisclosure-period trader approach. This is followed by a detailed discussion of who are the individual investors specifically harmed by insider trading, since the scope of potential plaintiffs is inherently related to the issues of causation and harm. It is recommended that the nondisclosure-period trader approach properly reflects the nature of harm caused by insider trading and eliminates the uncertainty of determining who qualifies as a plaintiff. Moreover, in order to avoid potential excessive damages due to the large number of plaintiffs under this approach, caps must be provided to limit the damages to some multiple of defendant's illicit gains, depending on how far private suits are intended to serve a deterrent purpose.

Keywords: Insider trading, civil remedies, compensation, claimant, measure of damages

JEL Classification: K22, K33

Suggested Citation

Huang, (Robin) Hui, Compensation for Insider Trading: Who Should be Eligible Claimants? (July 23, 2008). Australian Journal of Corporate Law, Vol. 20, No. 1, pp. 84-115, 2006, Available at SSRN: https://ssrn.com/abstract=1172962

(Robin) Hui Huang (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

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