Insider Tainting: Strategic Tipping of Material Non-Public Information

64 Pages Posted: 10 Aug 2017 Last revised: 12 Feb 2018

See all articles by Andrew Verstein

Andrew Verstein

University of California, Los Angeles (UCLA) - School of Law

Date Written: August 9, 2017

Abstract

Insider trading law is meant to be a shield, protecting the market and investors from connected traders, but it can also be a sword. Insofar as we penalize trading on the basis of material non-public information, it becomes possible to share information strategically in order to disable or constrain innocent investors. A hostile takeover can be averted, or a bidding war curtailed, because information recipients must then refrain from trading. This Article offers the first general account of “insider tainting,” an increasingly pervasive phenomenon of weaponizing insider trading law.

Keywords: Insider Trading, Wolf Packs, Activist Hedge Funds, Mergers and Acquisitions, Mark Cuban, Securities Regulation, Hostile Takeovers, Japan

Suggested Citation

Verstein, Andrew, Insider Tainting: Strategic Tipping of Material Non-Public Information (August 9, 2017). Northwestern University Law Review, Forthcoming, Wake Forest Univ. Legal Studies Paper, Available at SSRN: https://ssrn.com/abstract=3015757

Andrew Verstein (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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