Case Law Development Of The Theory Of Insider Trading Regulation In The United States

This paper focused on the role of case law in the development of theories on the regulation of inside trading in the United States of America. Prohibition of inside trading is the common attitude adopted by almost all countries around the world in the regulation of the securities market. The United States is the country with the most advanced and complete securities laws in the world and it is also the first to start regulating inside trading. The U.S. legal theories and principles in the regulation o f inside trading are not confined to its statutes, nor is it possible to be so confined. The source of the insider trading law is federal statutes, the SEC rules made under the authorization from the Congress and court-created case law. The study of this paper on the development of the US inside trading law demonstrates the crucial role played out by the case law.The beginning of this paper surveyed the legislative activities as well as backgrounds since the two most important statutes in the area of securities law - the1933 Securities Act and the 1934 Securities Exchange Act. In particular, it focused on the regulations and rules relating to inside trading, for instance, ?7 of the 1933 Act, ?0(b) and ?4(e) as well as the new-created ones ?0A and ?1A in the 80s of the1934 Act, and the Rule 10b-5 promulgated made SEC under the authorization of the relevant statutes. These provisions provide basis for the developing of the regulations on inside trading. There were, however, also blanks left by these regulations. It is the case law that timely filled in these blanks and further developed and perfected the legal theories in the regulation of inside trading.This paper surveys some of those most important and seminal cases in the area of US inside trading law to reveal the significant role of the case law in the advancement of legal theories in inside trading regulation. These cases, including SEC v. Texas Gulf Sulfur, Chiarella v. United States, Cady, Roberts, Dirks and O'Hagan, etc., build up a sophisticated system of theories in regulating inside trading. This paper goes through the original opinions of these cases, translates them into Chinese and after necessary summary and edits, adopts significant part of the original opinion for analysis to demonstrate the development of these theories. The analysis includes the definition of inside information, the classification of different insiders, the establishment of inside trading as well as the evolvement of the liability theory of inside trading. This paper also surveys some well-known doctrines developed by renowned scholars at home andabroad in the area of inside trading and applies and tests them in connection with the cases. In addition, this paper also makes some discoveries through the study of first-hand materials, for instance, the basis for the distinction between classic insider and constructive insider, the definition of non-insider, the meaning of "in connection with the purchase and sale of securities," the misappropriation theory. This paper seeks to establish a relatively complete track in the development of inside trading regulations in the United States through the analyses and discoveries, in particular the theories created by the case law.