Is there any special statute that defines insider trading?

Get Legal Help Today

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Aug 9, 2013

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Not really. The rules prohibiting insider trading were largely made by the SEC and the courts. The SEC first identified insider trading as a type of securities fraud coming within its broad rules defining and prohibiting manipulative and deceptive acts in 1961.

There are two bases for holding parties responsible for insider trading. The “special relationship” or “classical” theory is that an insider, because of his or her special relationship to the company, owes a fiduciary duty to the company’s shareholders not to trade on insider information for personal gain. The “misappropriation theory” does not focus on the insider’s duty to the company, but on the basis that if the trader obtained the information as a result of a breach of any fiduciary duty to the company, there is liability.

In addition to the classic insider, such as corporate officers and directors, insider liability may be asserted against others who gain access to insider information, such as a person who receives a “tip” from an insider, attorneys, accountants and printers who have access to that information.

In addition to being illegal under the Securities Laws, insider trading is often attacked criminally under the Federal mail fraud and wire fraud statutes. (For an excellent book on the subject, the 1,237 page Insider Trading by William S. K. Wang and Marc I. Steinberg was published by Little, Brown & Company in 1997.)

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption