Insider Trading's Legality Problem
22 Pages Posted: 19 Mar 2018
Date Written: March 16, 2018
In late 2016, in its highly-watched decision in Salman v. United States, the Supreme Court attempted once again to clarify the crime of insider trading, this time regarding the secondary and tertiary recipients of information commonly referred to as “remote tippees.” In doing so, the Court seemed to put to rest any question that a person who “gifts” a friend or family member with material non-public information for the purposes of trading on such information does in fact trigger a violation of law. As cases go, Salman is relatively straightforward. Nevertheless, it demonstrates several of the drawbacks that arise when criminal laws become the product primarily of cases and not statutes. Ordinarily, proponents of legislative law-making cast their arguments in fairness terms, as written statutes provide advance warning of what is and is not forbidden. This Essay contends that legislatively enacted statutes go further than that. Under the best circumstances, they can improve the content of criminal law precisely because they permit the legislature to differentiate similar yet morally distinct conduct. With this benefit in mind, the Essay imagines what insider trading law might look like were Congress to both define and subdivide the crime of insider trading into the kind of tiered or degreed crimes more routinely featured in state codes.
Keywords: insider trading, vagueness, deterrence, gradation, criminal law, legality principle
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