Wednesday, September 25, 2013
Sung Hui Kim (UCLA School of Law) has posted Insider Trading as Private Corruption (61 UCLA Law Review (2014), Forthcoming) on SSRN. Here is the abstract:
Deep confusion reigns over federal insider trading law, including even what the essential elements of an insider trading violation are. On the one hand, this uncertainty seems to have encouraged the Securities and Exchange Commission (SEC) and some lower courts to push the boundaries well beyond the limits previously established by the U.S. Supreme Court. On the other hand, influential academics continue to express normative skepticism about why insider trading is even banned at all. Without a satisfying theory of what's wrong with insider trading, doctrinal development in the lower courts has reached a crisis, with the economic stakes only getting higher. This Article offers a new theory of insider trading law. It is a form of private corruption, defined as the use of an entrusted position for self-regarding gain. The corruption theory not only provides answers to the normative skeptics but, as compared to the two leading alternatives, the property theory and the unjust enrichment theory, better fits the core features of the received doctrine. And, upon close analysis, the corruption theory reveals an implicit coherence to the doctrine that was previously unseen. Even better, the corruption theory provides relatively concrete guidance in hard cases, which is the sort of pragmatic theory that the SEC and the courts desperately need.