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Univ. of Toledo College of Law

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Sunday, February 1, 2009

Nagy on Insider Trading

Insider Trading and the Gradual Demise of Fiduciary Principles, by Donna M. Nagy, Indiana University School of Law-Bloomington, was recently posted on SSRN.  Here is the abstract:

Recent SEC enforcement actions, such as the case filed against Dallas Mavericks' owner Mark Cuban, raise the question whether deception by a fiduciary is essential to the Rule 10b-5 insider trading offense. Under the Supreme Court's classical and misappropriation theories, the answer is clearly yes - each theory has a fiduciary principle at its core. Yet lower courts and the SEC frequently disregard the Court's explicit dictates, and a consensus is emerging that insider trading rests simply on the wrongful use of material nonpublic information, regardless of whether a fiduciary-like duty is breached. Although this view of insider trading can be justified by the policy objectives underlying the Court's decision in United States v. O'Hagan, it currently lacks a solid doctrinal foundation. To resolve this anomaly, this Article offers specific suggestions that would bring much needed coherence and legitimacy to the law of insider trading.

http://lawprofessors.typepad.com/securities/2009/02/nagy-on-insider.html

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