An Outsider Looks at Insider Trading: Chiarella, Dirks and the Duty to Disclose Material NonPublic Information
The "abstain or disclose" rule, which states that persons in possession of material non-public information must either disclose that information or refrain from trading on such information, is at the heart of insider trading law. Despite the complex legal system designed to thwart insider trading, the community's widespread criticism of such conduct, and the risk of civil and/or criminal sanctions for violation of federal securities law, insider trading cases have been on the rise. This Note argues that a more serious stance against insider trading must be taken in order to achieve the federal securities laws' purposes and so that investors have confidence in the securities markets. The policy behind anti-fraud provisions is "to protect investors against manipulation of stock prices through regulation of transactions upon securities exchanges and in the over-the-counter markets, and to impose regular reporting requirements on companies whose stock is listed on national securities exchanges." Meanwhile, there are two categories of arguments in favor of insider trading: first, that there are inherent benefits to it and second, that the current system prohibiting insider trading needs to be reorganized. New legislative approaches have been presented as alternative remedies for reducing insider trading. For instance, the Insider Trading Sanctions Act of 1983, would substantially increase both civil and criminal penalties for insider trading. New legislative proposals such as these should be seen as valuable additions to insider trading law.
Frank P. Luberti, Jr.,
An Outsider Looks at Insider Trading: Chiarella, Dirks and the Duty to Disclose Material NonPublic Information ,
12 Fordham Urb. L.J. 777
Available at: https://ir.lawnet.fordham.edu/ulj/vol12/iss4/9