On Civil Liability For Insider Trading

As a kind of illegal phenomenon, the insider trading endangers the long-term, healthy, steady development of security market. At present, the countries and regions all over the world have been forbidding the inside trade by taking all sorts of measures. With the setting-up and perfection of the security market of our country, the inside trade violation and criminal offence have already become a phenomenon that can't be ignored, question about the inside trading activity discussion of carrying on the legal structure becomes the law circles' focus progressively. At present, our country has formed an intact system of legal regulation to insider trading activity separately which is composed by the laws and regulations about trade's self-restriction. However, there are lacks of regulations about the civil liabilities of insider trading. Under this kind of background, the strengthening of legal research about the inside trade's structure of security market of our country has been great, realistic meanings. This thesis discusses the regulations about the civil liabilities of insider trading with four parts, in which the third and fourth parts are the core.In Part One, the author ,mainly analyses the grounds of legal regulation to insider trading and the civil liabilities' functions of insider trading. First, the thesis, by analyzing the harmfulness of insider trading to the investors, the securities market and the national economy, indicates the viewpoint of constraining the insider trading has been widely accepted. Second, as the insider trading is a kind of special security transgression, there must be insurmountable obstacles to confirm tort liability of insider trade with the Law of Securities. Specific regulations must be made to solve this problem by amending the Law of Securities or constituting the Civil Code.In Part Two, on the base of the regulations of insider trading in China as well as the experience of other countries or regions, the thesis discusses the structure of securities insider trading, which mainly includes inside information, insider traders, and the classic types of insider traders. First, we deify characteristics of insider information. Under the rule, insider information refers to the information that conceits the business or finance of a company or may have a major effect on the market price of the securities there of and that hasn't been publicized in securities trading. Insider trading must be "on the basis" of material, nonpublic information. Second, we clarify the range of insider trader. Lastly, we studies that in the light of the forms of insider trading. There are mainly three forms: Any person who has obtained any insider information on securities trading purchase or sell the securities of the relevant company, or divulge such information, or advise any other person to purchase or sell such securities.In Part Three, we discuss civil liabilities of insider trading. Firstly, we analyses the property of civil liabilities of insider trading. In author's opinion, responsibilities of insider trading for damages should be ranged to tortuous responsibilities. Secondly, we analyses doctrine of liability fixation of civil liabilities of insider trading. Where any insider trading incurs any loss to investors, the actor shall be subject to the liabilities of compensation according to law. If a person trades "on the basis" of material and nonpublic information, we presume the trader is tort-feasor with liability for wrongs.The paper point out that "onus probandi inversion" should be adopted to civil lawsuits of insider trading in our country. Because, though, the burden of producing evidence should be assumed by the party who bring forward dissension, when the other party is in the special condition unfavorable for the opposite party to. obtain and control evidence, exception should be made under this obviously unfair condition. So it follows the principle of justice to make inside trader born the burden. Thirdly, we discuss composing elements of civil liabilities of insider trading. The composing elements system is composed of illegal acts, the subject fault of insider trader, the consequence of insider trading and the damage. The last section of this part analyzes the grounds of pleading of insider trading. The grounds of pleading are valid methods to protect the interests of good faith insider trader. It's very essential and good to setting up of the system of civil liability for tort for insider trading in our country.In Part Four ,firstly, we discuss the capacity of standing in court of subject of procedures to a civil lawsuit about insider trading. The author points out the five qualifications for those investors who have the right to claim. For compensation of insider trader for damages: (1) Only those who take the opposite way to the insider may claim for compensation for damages. (2) Investor who have the right to claim for during insider trading. (3) Investor who have the right to claim for compensations should be "good faith" investors. (4) Investor who took the opposite way to the insider traders suffer loss because of the exchange. (5) Securities held by investors who have the right to claim for compensations must be same securities held by insider traders. Secondly, we should strengthen and improve the class or representative action. Lastly, on the basis of introduction of American methods for computing compensation for damages, author suggests that the pure out of pocket for practical damages be the proper amount of compensation. Only by this way, insider trading will be frightened and held back effectively.