Research On Legal Systems Of Insider Trading--A Comparative Perspective

The article attempts to provide comparative analysis of the respective strengths and weaknesses of insider trading laws of China and the United States. To present as accurate as possible a picture of insider trading laws in the 2 countries, the author of this article tries to incorporate the latest developments both in insider trading legislations and judicial practices into the article, with a view to providing some theoretical justifications and insights towards enhancing China's insider trading regulation.The article is comprised of three chapters, dwelling upon the insider trading laws of China and the United States by pursuing comparative analysis in the evolution of insider trading laws, the structure and the legal liabilities of insider trading. The evolution of insider trading laws sketches the legislative histories of insider trading in China and the United States, serving as a starting point for ensuing comparative analysis. The structural analysis of insider trading laws centers around the identification of insiders, the definition of insider information and the delimitation of insider trading behavior. With the structural analysis, the article ferrets out in the insider trading laws and regulations of China some serious defects, including but not limited to contradictions in identifying insider , flaws in defining insider information , and connotative ambivalence in the legal term of "use of insider information" . The article suggests critical adoption of the "substantive" standard and the "reasonable investor" standard to define the two most important properties of inside information while proposing modifications to the "awareness" standard so that a constructive use of insider information can be made on sheer possession of insider information. But the author also points out the inadequacies of predicating regulation of insider trading on the fiduciary theory and proposes instead adoption of the equal access theory as the theoretical foundation of insider trading regulation in China. Liabilities of insider trading are approached in the textures of administrative, penal and civil liabilities. Comparison of administrative liabilities begins with administrative sanctions and ends with regulatory institutions, concluding that the phenomenal difference in the efficacy of insider trading regulation between the two countries lies largely in enforcement institutions. The penal liability of inside trading focuses on the analysis of the subjective and objective sides of criminal insider trading, disapproving the dual pecuniary sanctions as provided by China's Penal Code and putting forward the proposal of scienter construction for criminalizing tipping behavior of insider trading. The center piece of the article is found in the part of civil liabilities of insider trading. But as China's laws and regulations are almost silent on the civil aspect of insider trading, the author of this article, while borrowing freely from relevant laws in the United States, has to rely on the judicial explanations of China's Supreme Court on false or misleading presentation as a roadmap towards constructing a civil liability framework for insider trading. Under the framework, tentative research is done in such areas as qualifications of the plaintiffs, the rationale behind civil damages, the computation of civil damages, the introduction and enhancement of group actions and shareholder's derivative actions.