Law Commons^™

The Solution To Shadow Trading Is Not Found In Current Insider Trading Law: A Proposed Amendment To Rule 10b5-2, Jamel Gross-Cassel

Fordham Journal of Corporate & Financial Law

Shadow trading is a lucrative way to exploit a loophole in insider trading law. Insiders abuse this loophole to make six-figure profits and escape liability when done at the right companies. Those who shadow trade use material, nonpublic information to trade not in the securities of their own company, which would be illegal, but in the securities of a closely related company where the information is just as impactful. Efforts to close this loophole rely on the individual insider trading policies of the involved companies. These policies vary in language, making liability for shadow trading dependent on specific language or …

The Insider Trading Prohibition Act: A Small Step Towards A Codified Insider Trading Law, Kayla Quigley

Fordham Journal of Corporate & Financial Law

Many have called for reform to insider trading law, as the current judge-made doctrine is ambiguous, complicated, and ultimately permissive of many instances of trading on nonpublic information. Indeed, Congress has attempted several times to pass a uniform insider trading statute. Most recently, in December 2019, the House of Representatives passed the Insider Trading Prohibition Act (“ITPA”). The legislation codifies many current principles of insider trading jurisprudence while also expanding potential insider trading liability. Moreover, it attempts to fix gaps in the law that various cases, such as United States v. Newman, have declined to address.

Among other flaws, …

Mind The Gap(S): Solutions For Defining Tipper-Tippee Liability And The Personal Benefit Test Post-Salman V. United States, Matthew Williams

Fordham Journal of Corporate & Financial Law

The Supreme Court’s decision in Salman v. United States reaffirmed (and indeed, clarified) the central holding of Dirks v. SEC that no additional pecuniary or reputational gain is needed when an insider gives information to a “trading relative or friend.” While this was considered a win for prosecutors, the Court chose to abstain from considering more complex questions regarding tipper-tippee liability. Namely, the Court provided no guidance on what constitutes a “friend” or “trading relative” nor how a tippee “should know” whether information was improperly disclosed. Without any clear standards, prosecutors and courts have wide discretion to determine whether these …

Private Investor Meetings In Public Firms: The Case For Increasing Transparency, Martin Bengtzen

Fordham Journal of Corporate & Financial Law

While developments in the law of insider trading usually attract significant scholarly interest, far less attention has been paid to the design and effects of the Securities and Exchange Commission’s complementary Regulation Fair Disclosure. Yet, this Article argues that the SEC’s current quandaries relating to insider trading enforcement are largely self-inflicted and could have been avoided if it had better aligned its Reg. FD with the Supreme Court’s insider trading jurisprudence.

Introduced sixteen years ago to prevent senior officers of public firms from leaking material information to preferred investors and financial analysts, Reg. FD was designed to function as a …

The Big Patent Short: Hedge Fund Challenges To Pharmaceutical Patents And The Need For Financial Regulation, Ariel D. Multak

Fordham Journal of Corporate & Financial Law

The enactment of the America Invents Act (AIA) in 2011 ushered in a new system for post-grant patent review. In the interest of enhancing the efficiency of the patent regime by invalidating “bad” patents, certain requirements were relaxed. For example, the AIA created an examination process called inter partes review, which allows a party without legal standing to challenge the validity of a patent in front of the Patent Trial and Appeal Board. In the pharmaceutical patent context, it was expected that inter partes review would be utilized mostly by generic drug makers seeking to invalidate patents without incurring the …

Defining "Material, Nonpublic": What Should Constitute Illegal Insider Information?, Cindy A. Schipani, H. Nejat Seyhun

Fordham Journal of Corporate & Financial Law

It has been over fifty years since the United States Securities and Exchange Commission held that insider trading on material, nonpublic information is illegal, and despite the passage of the Insider Trading Sanctions Act in 1984, Insider Trading and Securities Fraud Enforcement Act in 1988, and the Sarbanes-Oxley Act of 2002, there is still no clear definition of “material, nonpublic information.” This Article argues that the ambiguity of what constitutes illegal insider information enables corporate insiders to engage in profitable transactions without legal consequences. Furthermore, we argue and provide evidence that the necessity of showing a tipper’s personal benefit creates …

From Chiarella To Cuban: The Continuing Evolution Of The Law Of Insider Trading, Anthony Michael Sabino, Michael A. Sabino

Fordham Journal of Corporate & Financial Law

Parts II and III of this Article provide an exposition of the statutory underpinnings of insider trading and a description of the fundamentals of federal securities laws. Parts IV through VII then trace the development of modern insider trading jurisprudence, starting with the Supreme Court’s inaugural holding in Chiarella and then moving across three decades of evolving precedent to the recent Cuban decision. Part VIII provides the authors’ analysis and commentary on the current state of insider trading laws. The Article concludes in Part IX with some observations as to what the future holds for the law of insider trading.

Are Chinese Walls The Best Solution To The Problems Of Insider Trading And Conflicts Of Interest In Broker-Dealers?, Christopher M. Gorman

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Misappropriation Theory Of Insider Trading In The Supreme Court: A (Brief) Response To The (Many) Critics Of United States V. O'Hagan, Randall W. Quinn

Fordham Journal of Corporate & Financial Law

No abstract provided.