I got this email from a staffer to a Democratic Congressman from New England:
Our boss ... is concerned with the recent 2nd Circuit Court of Appeals decision in the insider trading case against Todd Newman and Tony Chiasson. It seems that the appeals court relied on the Supreme Court's intent in a 1983 ruling, Dirks v. the Securities and Exchange Commission, which said a person could be guilty of insider trading only if he knew that the corporate insider leaking the information was breaching a duty to the company. When defining a breach, the court explained that "the test is whether the insider personally will benefit," adding, "Absent some personal gain, there has been no breach of duty.” This seems like a very narrow standard, and our boss is interested in introducing legislation to prohibit insider trading outright. We saw you quoted in a recent New York TImes article on the subject and are hoping to arrange a time for a call to discuss ways to broaden the standard to prohibit all insider trading.
To which I responded:
Why on earth would you want to prohibit all insider trading? It seems to me that the Newman court got it exactly right, as I explained in this blog post.
For a more detailed discussion of the state of insider trading law and the rationale for prohibiting some--but not all--insider trading, see my essay Regulating Insider Trading in the Post-Fiduciary Duty Era: Equal Access or Property Rights, in Research Handbook on Insider Trading 80 (Edward Elgar Publishing; Stephen M. Bainbridge ed. 2013), which I attach.
You can download a pre-publication draft of the essay here. Or, better yet, you could buy one of my books:
