Should All Trading While in Possession of Inside Information Be Illegal?

In a new article, I answer in the affirmative the question posed in the title of this post. In the United States, we should replace our current regime of muddled and confused insider trading law with a sweeping prohibition on trading when in possession of inside information, much like the prohibition already in place in the European Union.

Why should insider trading be outlawed? How we answer this question shapes our policy recommendations. One way to answer is to look at how the inside information was obtained. Was it taken in breach of a fiduciary duty? Is the information … Read more

Salman Insider-Trading Case a Hollow Win for Prosecutors

The dominant narrative about Salman v. United States, the first insider trading case decided by the U.S. Supreme Court in almost 20 years, is that it was a big win for federal prosecutors. That is only part of the story.

There is certainly good news in the Salman decision for prosecutors. It reaffirms the prohibition against trading based on material nonpublic information provided to a friend or family member as a gift. Moreover, the opinion explicitly rejects the suggestion in United States v. Newman, a 2014 federal appeals court decision, that a tip made to a friend or family … Read more

Insider Trading: Time for Supreme Court to Ditch Personal Benefit Test

The U.S. Supreme Court has a number of options when it considers its first insider trading case in almost 20 years.  The case is Salman v. United States, and oral argument will be held on October 5.  The facts of Salman involve Maher Kara, an investment banker at Citigroup, who shared material nonpublic information from his job with his brother, Michael, in violation of firm policy.  Maher knew that his brother would use that information to trade securities.  The issue the Court has agreed to address is whether passing information from one brother to another can trigger insider trading … Read more