Research On The Establishment Of Civil Compensation Regime On Insider Trading

China has revised the Security Law in2005, first time recognizing the legal basis for civil suits on insider trading, without detailing the constituent elements and the calculation method of damages. This paper aims to provide advices for constructing an explicit civil compensation regime of insider trading.Chapter1describes the basic theory of civil compensation regime of insider trading, analyzing the status of civil compensation on insider trading, introducing the development trend of insider trading, confirming the nature of civil liability of insider trading as statutory responsibility, so as to directly stipulating special rules. This chapter also draws the conclusion of adopting "administrative penalty as a prerequisite procedure".Chapter2discusses the constituent elements of civil liability on insider trading, setting the judging standard for insider personnel and insider information, adopting the "contemporaneous trader" theory on causality, and advocates to define "contemporaneous" as24hours by drawing lessons from American and Taiwan.Chapter3researches the calculation method of civil compensation on insider trading, introducing the dual system including common damage compensation and civil penalty of American and Taiwan, advocating that China should adopt dual compensation system, fixing the former as the defendant’s illegal gains, the latter as N times of the defendant’s illegal gains, and confirming the plaintiffs’ losses as the gap between price paid or gotten by plaintiff on security exchange and closing security price of10business days after the disclosure of insider information.Chapter4researches the distribution system of compensation from insider trading, introducing the fair fund regime of American, advocating that China should set up a fund gathering the civil compensation from insider trading. The court should determine the scope of eligible plaintiffs and their losses, order defendants to hand in the compensation to the Fund. This chapter also advices that the disgorgement should be incorporated to the Fund, and then the Fund will be allocated to eligible plaintiffs.This paper includes the whole procedure of civil suits on insider trading, and puts forward with specific legislative proposals for each step, so it is valuable on both theoretical and practical aspect.