Securities Law Prof Blog

Anderson on Insider Trading

John P. Anderson has posted Poetic Expansions of Insider Trading Liability on SSRN with the following abstract:

Professors Michael Guttentag and Donna Nagy have each offered arguments suggesting that the entire tipper-tippee framework first laid out by the Supreme Court in Dirks, including the personal benefit test, has been rendered obsolete by subsequent common law and regulatory developments that have fundamentally transformed the U.S. insider trading enforcement regime. These developments include: (1) the Supreme Court’s endorsement of the misappropriation theory in United States v. O’Hagan, (2) recent state court decisions offering more expansive accounts of what conduct constitutes a breach of fiduciary duty of loyalty in the corporate context, and (3) the SEC’s adoption of Regulation FD in 2000.

Both Guttentag’s and Nagy’s arguments are erudite and quite creative. Such creativity is a virtue in law professors, but not in prosecutors. Exercising poetic license to expand criminal liability risks violating the time-honored principal of legality and leaving citizens without adequate notice of the crimes for which they may be charged. Insider trading law in the United States is already plagued by vagueness, and concern over prosecutors’ continued exploitation of this ambiguity to push the line of liability further and further out is part of what motivated the Second Circuit to push back in Newman. I share the Newman court’s concern.

In this short article, I summarize what I take to be the most crucial aspects of Guttentag’s and Nagy’s arguments. I then offer some criticism. Specifically, I explain why I regard these interpretations as poetic expansions (rather than straightforward readings) of the law, a conclusion that was only strengthened by the Supreme Court’s recent decision in Salman.

New Securities Law Articles in Print

The following law review articles relating to securities regulation are now available in paper format:

Zachary Ballas, Note, Equity Crowdfunding -- The JOBS Act (Almost) to the Rescue, 25 Cardozo J. Int'l & Comp. L. 317 (2017).

Benjamin J. Catalano, The Promise of Unfavorable Research: Ramifications of Regulations Separating Research and Investment Banking for IPO Issuers and Investors, 72 Bus. Law. 31 (2017).

Christian Chamorro-Courtland & Marc Cohen, Whistleblower Laws in the Financial Markets: Lessons for Emerging Markets, 34 Ariz. J. Int'l & Comp. L. 187 (2017).

Yuliya Guseva, Extraterritoriality of Securities Law Redux: Litigation Five Years After Morrison v. National Australia Bank, 2017 Colum. Bus. L. Rev. 199.

Robert C. Hockett & Saule T. Omarova, The Finance Franchise, 102 Cornell L. Rev. 1143 (2017).

Kumiko Koens & Charles W. Mooney Jr., Security Interests in Book-Entry Securities in Japan: Should Japanese law Embrace Perfection by Control Agreement and Security Interests in Securities Accounts?, 38 U. Pa. J. Int'l L. 761 (2017).

Gala Ades-Laurent, Note, Disappearing Stock Options: The Evolution of Equity Pay, 2017 Colum. Bus. L. Rev. 347.

Edward T. McDermott, Holder Claims -- Potential Causes of Action in Delaware and Beyond, 41 Del. J. Corp. L. 933 (2017).

Samantha Osborne, Note, Dodd-Frank Whistleblower Provision: Determining Who Qualifies as a Whistleblower, 41 Del. J. Corp. L. 903 (2017).

 

 

NASAA Spotlights Warning Signs of Guardian Financial Abuse

Details available here.