Civil Insider Trading in Personal Networks

Abstract

This Article, together with a predecessor companion article on criminal friends-and-family insider trading activity, is designed to provide data-driven groundwork for the study of U.S. insider trading violations involving personal—rather than business—relationships. Specifically, the Article provides a preliminary report on insider trading in personal networks based on a proprietary data set that includes information culled from eleven years of public enforcement actions in which material nonpublic information was allegedly conveyed between or among people in friendships or familial relations.

To lay a foundation for the study of insider trading in personal networks, the Article proceeds first by describing relevant aspects of insider trading doctrine and enforcement as key elements of the U.S. legal landscape relevant to a study of civil insider trading in personal networks. Next, the Article explains the methodology used for identifying and categorizing information on friends-and-family insider trading obtained from public civil enforcement actions filed between 2008 and 2018. The Article then describes that information from two key vantage points: the types of relationships represented by the participants in the alleged insider trading and the gender of those participants. The Article closes with a conclusion that offers related observations and avenues for further study. 

Keywords: insider trading, friendship, family, enforcement, Securities and Exchange Commission, Department of Justice, securities

JEL Classification: K22, K36, L14, L51, M10, P10, Z10, Z13, G30, G41, G38, D10