Mixed Motives Insider Trading

62 Pages Posted: 4 Sep 2020 Last revised: 17 Feb 2021

See all articles by Andrew Verstein

Andrew Verstein

University of California, Los Angeles (UCLA) - 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, UCLA School of Law, Law-Econ Research Paper No. 20-05, Available at SSRN: https://ssrn.com/abstract=3558540 or http://dx.doi.org/10.2139/ssrn.3558540

Andrew Verstein (Contact Author)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics