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Federal; Insider Trading; Insolvent; Insolvency; Bankrupt; Bankruptcy; Debt-trading; Creditor; Securities; Securities Law; Trading Restrictions; Policy; 16(b); 1934 Act; 10b-5; 14e-3
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Full-Text Articles in Securities Law
Insider Trading: Are Insolvent Firms Different?, Andrew Verstein
Insider Trading: Are Insolvent Firms Different?, Andrew Verstein
Brooklyn Journal of Corporate, Financial & Commercial Law
Federal law restricts insider trading. Yet these restrictions operate differently on insolvent or bankrupt firms. The law is more constraining in some respects: federal law extensively regulates the trading of residual claims in solvent firms but not insolvent firms. However, the law is more constraining in other respects: insider trading law does little to limit debt-trading at solvent firms, but a bankruptcy enmeshes all creditors in a web of insider trading rules. This Article identifies insolvency’s economic and legal influence on insider trading law and then normatively evaluates this transformation.