Section Two: Fraud in the Financial Marketplace -- Insider Trading: Its Evolution and Elements and Practical Considerations (From Readings in White-Collar Crime, P 83-103, 1991, John Lichtenberger, ed. -- See NCJ-129577)

• NCJ Number: 129582
• Author(s): J S Siffert; P McDonagh
• Date Published: 1991
• Length: 21 pages
• Sale Source: Meckler Publishing
• Publication Type: Legislation/Policy Description
• Language: English
• Country: United States of America

Annotation

Insider trading is defined as the act of purchasing or selling securities while in the possession of nonpublic information about the issuer of the securities, in breach of some existing duty to refrain from such conduct.

Abstract

Insider trading is a court-created rather than a statutory crime. It was not until 1961 that the Securities and Exchange Commission expressed the disclose-or-abstain rule that formed the basis of insider trading liability. Insider trading theories are based on common law precedent, early decisions under Federal securities laws, U.S. Supreme Court decisions narrowing insider trading liability, and due process difficulties with existing insider trading statutes. Recent legislation dealing with insider trading primarily includes the Insider Trading and Securities Fraud Enforcement Act of 1988. Elements of a criminal insider trading violation are threefold: (1) the defendant employed a device or scheme to defraud, made an untrue statement of material fact or omitted a material fact, and/or engaged in an act or practice that imposed fraud or deceit upon a stock purchaser or seller; (2) the defendant acted willfully, knowingly, and with the intent to defraud; and (3) the defendant knowingly used or caused to be used any means of transportation or communication in interstate commerce or the use of mail to further fraudulent conduct. Practical considerations in defending an insider trading case involve whether the case is criminal or civil, prosecutorial discretion, type of proof required, and testimony