Unexpected Insider Trading Abuses and the Need for Revision of Rule 10b5-1(c)

Cioppa, Paolo
January 2009
Global Jurist;Jan2009, Vol. 9 Issue 1, p6
Academic Journal
While insider trading laws are certainly desirable, there is a risk that such laws may be overreaching. When a potential for overreaching rules exists, regulators should focus on the substance of a particular transaction and strike a balance between prohibiting activities which are based on non-public inside information, while permitting activities which, arguably, are not. However, finding the right balance between activities which should be permitted and activities which should be qualified as "insider trading" is not always a straightforward activity and regulators should be particularly aware of the potential adverse consequences and abuses that poorly drafted rules may cause. This paper identifies an interesting example of this type of situation which can be derived from the current United States regulation, Rule 10b5-1(c) and argues that, in light of the generally recognized American and international principles of insider trading, the SEC should revisit Rule 10b5-1(c) to limit possible insider trading abuses. In addition, it highlights possible proposals that the Commission ought to take into consideration.


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