Brett T. Atanasio
ABSTRACT
The Second Circuit’s decision in United States v. Newman has reinvigorated an important and longstanding debate about insider trading—whether insider trading should be explicitly prohibited by statute. In response to the Second Circuit’s decision, Congress introduced three bills to codify insider trading liability. Each bill takes a different approach to codifying insider trading liability. Between the three bills, two general approaches emerged. One approach is to impose a broad prohibition on insider trading that arguably leaves the existing insider trading regime untouched. The second approach develops a narrower, carefully delineated standard of liability that departs from the current insider trading regime in important ways. Both approaches deserve careful scrutiny if Congress decides to move forward with codifying insider trading liability by statute.
First, to provide a foundation, this Comment briefly traces the judicial development of insider trading liability through the U.S. Supreme Court’s previous decisions on insider trading. Next, this Comment discusses United States v. Newman and the executive and judicial responses to that decision. This Comment then discusses the need for codifying insider trading liability by statute and the potential benefits of codification. Next, a careful analysis of each bill identifies its strengths and weaknesses. Even small differences between bills impose vastly different standards of liability and provide varying levels of guidance for market actors, prosecutors, and the courts. Finally, this Comment proposes changes to the bills’ established frameworks and outlines other considerations Congress should consider if it decides to codify insider trading liability by statute.