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A Critical Analysis of Misappropriation Theory in Insider Trading Cases

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  • Salbu, Steven R.

Abstract

Under the present judicial interpretation of federal securities law, an individual is prohibited from trading on non-public information that has been misappropriated in contravention of a fiduciary duty. Trades made using non-public information that has not been misappropriated are not prohibited by Rule 10b-5, promulgated under the Securities and Exchange Act of 1934. The current requirement of misappropriation to trigger Rule 10b-5 liability creates a gap that permits transactions that are both ethically and economically undesirable. Judicial or legislative reforms are recommended to close the gap and help ensure the fairness and efficiency of securities markets.

Suggested Citation

  • Salbu, Steven R., 1992. "A Critical Analysis of Misappropriation Theory in Insider Trading Cases," Business Ethics Quarterly, Cambridge University Press, vol. 2(4), pages 465-477, October.
    • Handle: RePEc:cup:buetqu:v:2:y:1992:i:04:p:465-477_00
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    Cited by:

    1. Jinhua Cui & Hoje Jo & Yan Li, 2015. "Corporate Social Responsibility and Insider Trading," Journal of Business Ethics, Springer, vol. 130(4), pages 869-887, September.
    2. Robert McGee, 2010. "Analyzing Insider Trading from the Perspectives of Utilitarian Ethics and Rights Theory," Journal of Business Ethics, Springer, vol. 91(1), pages 65-82, January.
    3. Robert McGee, 2008. "Applying Ethics to Insider Trading," Journal of Business Ethics, Springer, vol. 77(2), pages 205-217, January.

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