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Application of the Federal Mail and Wire Fraud Statutes to Criminal Liability for Stock Market Insider Trading and Tipping

74 Pages Posted: 16 Apr 2015 Last revised: 3 Jun 2015

William K. S. Wang

University of California, Hastings College of the Law

Multiple version iconThere are 2 versions of this paper

Date Written: April 13, 2015

Abstract

SEC Rule 10b-5 covers a great deal of stock market insider trading and tipping, but certainly not all.

For insider trading defendants, some elements of criminal liability may be different and possibly easier to satisfy under mail/wire fraud than under SEC Rule 10b-5 (e.g., materiality, and the requirements for tipper and tippee liability recently tightened for Rule 10b-5 by the Second Circuit). Generally, courts have not addressed these possible differences.

With insider trading and tipping, the victim of mail/wire fraud could be either the information-owner or the party on the other side of the transaction. The courts have not examined the latter victim and the possibility that such mail/wire fraud liability might be broader than under the Rule 10b-5 “classical relationship.”

Another unexplored question is whether an employee of a company engaging in an insider trade of its stock could be criminally liable under two different mail/wire fraud theories with two separate mail/wire fraud victims: the company/information-owner and the party on the other side of the transaction.

Keywords: insider trading, mail fraud, wire fraud, Rule 10b-5, tipper liability, tippee liability, Carpenter, Dirks, Newman, securities regulation, white collar crime

JEL Classification: K22

Suggested Citation

Wang, William K. S., Application of the Federal Mail and Wire Fraud Statutes to Criminal Liability for Stock Market Insider Trading and Tipping (April 13, 2015). University of Miami Law Review, Vol. 70, Forthcoming; UC Hastings Research Paper No. 141. Available at SSRN: https://ssrn.com/abstract=2594103

William Kai-Sheng Wang (Contact Author)

University of California, Hastings College of the Law ( email )

200 McAllister Street
San Francisco, CA 94102
United States

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