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https://ssrn.com/abstract=330520
 
 

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Insider Abstention


Jesse M. Fried


Harvard Law School; European Corporate Governance Institute (ECGI)


Yale Law Journal, Vol. 13, pp. 455-492, 2003
UC Berkeley Public Law Research Paper No. 330520

Abstract:     
According to conventional wisdom, insiders' use of private information to abstain from trading raises the same policy concerns as insider trading. This widely held perception has dominated much of the academic debate over the regulation of insider trading. I show that this view is flatly incorrect: as long as insiders cannot trade while in possession of nonpublic information, their ability to use nonpublic information to abstain from trading does not make them better off than public shareholders. I then explain why insider abstention cannot give rise to the same type of economic distortions that might be associated with insider trading. I conclude by analyzing the implications of my findings for a number of issues in insider trading regulation, including the use vs. possession debate and the Rule 10b5-1 safe harbor.
Key Words:

Number of Pages in PDF File: 38

Keywords: inside information, insider trading, securities regulation

JEL Classification: G18, G38, K22


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Date posted: September 18, 2002 ; Last revised: September 27, 2010

Suggested Citation

Fried, Jesse M., Insider Abstention. Yale Law Journal, Vol. 13, pp. 455-492, 2003; UC Berkeley Public Law Research Paper No. 330520. Available at SSRN: https://ssrn.com/abstract=330520 or http://dx.doi.org/10.2139/ssrn.330520

Contact Information

Jesse M. Fried (Contact Author)
Harvard Law School ( email )
1575 Massachusetts
Griswold Hall 506
Cambridge, MA 02138
United States
617-384-8158 (Phone)
HOME PAGE: http://www.law.harvard.edu/faculty/directory/10289/Fried

European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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