Mixed Motives Insider Trading

61 Pages Posted: 4 May 2020

See all articles by Andrew Verstein

Andrew Verstein

Wake Forest University School of Law

Date Written: March 21, 2020


If you trade securities on the basis of careful research, then you are a brilliant and shrewd investor. If you trade on the basis of a hot tip from your brother-in-law, an investment banker, then you are a criminal. What if you trade for both reasons?

There is no single answer, thanks to a three-way circuit split. Some courts would forgive you according to your lawful trading motives, some would convict you in keeping with your bad motives, and some would hand the issue to the jury. Sometimes called the “awareness/use” debate or the “possession/use” debate, the proper treatment of mixed motive traders has occupied dozens of law review articles over the last thirty years.

This Article demonstrates that courts and scholars have so far followed the wrong reasons to the wrong answers. Instead, this Article takes trader motives seriously, drawing on insights and solutions from the broader jurisprudence of mixed motive. This analysis generates a new legal test and demonstrates the test’s superiority.

Keywords: Insider Trading, Mixed Motives, Use, Possession, 10b-5, 10b5-1, Trading Plan

Suggested Citation

Verstein, Andrew, Mixed Motives Insider Trading (March 21, 2020). Iowa Law Review, Vol. 106, 2020. Available at SSRN: https://ssrn.com/abstract=3558540 or http://dx.doi.org/10.2139/ssrn.3558540

Andrew Verstein (Contact Author)

Wake Forest University School of Law ( email )

P.O. Box 7206
Winston-Salem, NC 27109
United States
3367585433 (Phone)

HOME PAGE: http://law.wfu.edu/faculty/profile/verstea/

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