Insider Trading As Fraud

U.S. Insider trading law is strange. Because Congress has never adopted a comprehensive statute on the subject, insider trading law is largely a species of federal common law. That’s not to say that the Supreme Court has nothing to go on — since 1980, it has developed its insider trading jurisprudence around Section 10(b) of the Securities Exchange Act of 1934 and the SEC’s Rule 10b-5. But in some ways, this fact makes things even stranger because Rule 10b-5 simply creates liability for securities fraud. And yet, what does insider trading have to do with fraud?

A lot, or so … Read more

Reconsidering the Institutional Design of Federal Securities Regulation

The scholarly literature on institutional design focuses on how legal institutions, including administrative agencies, legislatures and courts, should be organized in order to produce the best legal outcomes. In a recent article, I consider how this literature might help us think about the structure for regulating the U.S. securities industry. While the SEC is given substantial decision-making authority under the current state of things, I conclude that we might benefit from giving it even more. Additionally, I suggest, there might be benefits in adopting mechanisms, other than judicial review, aimed at reducing the risk of error inherent in the … Read more