U.S. flag

An official website of the United States government, Department of Justice.

NCJRS Virtual Library

The Virtual Library houses over 235,000 criminal justice resources, including all known OJP works.
Click here to search the NCJRS Virtual Library

Insider Trading and Securities Fraud Enforcement Act of 1988 and Controlling Person Liability: Can Firms Outside the Securities Industry Risk Not to Adopt Insider Trading Safeguard?

NCJ Number
134307
Journal
University of Detroit Law Review Volume: 67 Issue: 2 Dated: (Winter 1990) Pages: 261-307
Author(s)
P M Donnelly
Date Published
1990
Length
46 pages
Annotation
The prohibition of insider training in the 1988 Act is examined in reference to companies outside the securities firm context.
Abstract
Section 3 of the Insider Training and Securities Fraud Enforcement Act of 1988 provides the Securities Exchange Commission (SEC) with authority to impose civil penalties on controlling persons in the securities industries, particularly brokers, dealers, or investments advisers, regarding insider training. However, the 1988 Act does not clearly apply this standard to law firms, accounting firms, corporations, and other companies which acquire inside information while performing services. In order to examine this application, the basic principles behind the ban on insider training are outlined with a presentation of the arguments pro and con as well as the development of insider trading laws. Section 3 of the 1988 Act is presented together with section 25(f) of the 1934 Act and section 204 A of the 1940 Investment Advisor Act as a possible indication of the extension of the 1988 Act to entities outside the industry. Until the question of application to firms outside securities is resolved, the more immediate issue concerns the liability controlling persons outside the securities industry face without designated procedures to prevent insider trading.