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50 Case W. Res. L. Rev. 269 (1999-2000)
Securities Trading: A Contractual Perspective

handle is hein.journals/cwrlrv50 and id is 289 raw text is: SECURITIES TRADING:
Jonathan R. Maceyt
When Henry Manne wrote his famous article, In Defense of In-
sider Trading,' following his classic book Insider Trading and the
Stock Market,2 insider trading was viewed as an immoral, unscrupu-
lous, unfair, and vicious attack on the market and investors. The
same, of course, is true today.
The development of the justifications for outlawing insider trad-
ing date back at least to a 1910 article written by legal scholar H.L.
Wilgus.3 Drawing on lawyerly appeals to the ideals of fairness and
morality, Wilgus concluded that the practice of insider trading was
morally offensive.4 Other legal scholars, namely Professor A.A.
Berle, agreed with Wilgus and continued scholarly work supporting
Wilgus' initial desire to outlaw insider trading.5
These views were reflected during those portions of the Con-
gressional hearings on the promulgation of the Securities Laws that
were held in 1933 and 1934 to discuss the practice and impact of in-
sider trading. As Dean Manne observed, these hearings resulted in
the practical adoption of many of the ideas of Wilgus and Berle with-
out any concrete explanation for their blanket acceptance.6 In par-
ticular, Sections 10(b)7 and 16(b)8 of the Securities Exchange Act of
1934 and Rule 10b-59 were enacted to prevent insiders from trading
on their superior knowledge of corporate affairs.
t J. DuPratt White Professor of Law and Director, John M. Olin Program in Law and
Economics, Cornell University Law School.
1 Henry G. Manne, In Defense ofInsider Trading, HARv. Bus. REv., Nov.-Dec. 1966, at
3 For further discussion, see H.L. Wilgus, Purchase of Shares of Corporation by a Di-
rectorfrom a Shareholder, 8 MICH. L. REV. 267 (1910).
4 See MANNE, supra note 2, at 4.
5 See id. at 5.
6 See id. at 10-11.
7 15 U.S.C. § 78j (1994).
' 15 U.S.C. § 78p (1994).
9 17 C.F.R. § 240.10b-5 (1999).


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