The Facebook Effect: Secondary Markets and Insider Trading in Today's Startup Environment

13 Pages Posted: 19 Mar 2012 Last revised: 9 Sep 2015

See all articles by Stephen F. Diamond

Stephen F. Diamond

Santa Clara University - School of Law

Date Written: March 17, 2012

Abstract

The dismissal of a senior Facebook employee in connection with the purchase of Facebook shares on a private resale trading platform last year raised new concerns about secondary trading in the securities of private companies and insider trading. This practitioner-oriented essay explores these issues and suggests that startup companies consider adopting a variation on the standard insider trading policy widely adopted by public companies. The discussion is important in light of new attention being paid by regulators to insider trading as well as a debate in Congress about barriers to raising capital for smaller companies. This paper was included as a chapter in Research Handbook on Insider Trading edited by Stephen Bainbridge and published by Elgar.

Keywords: securities regulation, insider trading, secondary markets, startup companies

Suggested Citation

Diamond, Stephen F., The Facebook Effect: Secondary Markets and Insider Trading in Today's Startup Environment (March 17, 2012). Santa Clara Univ. Legal Studies Research Paper No. 2025494, Available at SSRN: https://ssrn.com/abstract=2025494 or http://dx.doi.org/10.2139/ssrn.2025494

Stephen F. Diamond (Contact Author)

Santa Clara University - School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

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