USA Insider Trading Law: Its Unacceptable Framework and a Proposed Solution

Abstract

This chapter provides an analysis of the unacceptable framework of insider trading law in the United States and proffers a proposed solution. First, key U.S. Supreme Court decisions in the insider trading area are examined, with discussion also of lower court case law that existed prior to these Supreme Court decisions. Second, the chapter focuses on measures that the Securities and Exchange Commission (SEC) has taken to limit the scope of these decisions in the Commission's quest to implement a robust enforcement regimen in this setting. This discussion also addresses lower court case law and congressional action that impact the U.S. insider trading framework. The result of these measures is the presence of disparate, inconsistent, and unfair regulation. Third, the last part of the chapter recommends an alternative framework that, if adopted, would provide a far superior insider trading framework.

Keywords: insider trading, material nonpublic information, MNPI, United States law, fiduciary duty, parity and access approaches, proposals for improvement, financial regulation, insider trading framework

JEL Classification: K22