Start Making Sense: An Analysis and Proposal for Insider Trading Regulation
![handle is hein.journals/geolr26 and id is 189 raw text is: START MAKING SENSE: AN ANALYSIS
AND PROPOSAL FOR INSIDER TRADING
REGULATION*
Jill E. Fisch**
When Charles Dickens wrote the law is a[n] ass,1 he might
well have been describing the law governing insider trading.2 The
history of government enforcement in this area, including the re-
cent litigation over broker Robert Chestman's trading in
Waldbaum stock,3 demonstrates that the legal restrictions on trad-
ing securities while in possession of material nonpublic information
are confused and confusing.' The legal uncertainty has been attrib-
* Copyright by Jill E. Fisch, 1991. The title refers to the TAL ING HEADS film STOP
MAKING SENSE (Columbia Pictures 1984) and the album of the same name.
** Associate Professor, Fordham University School of Law;, B.A. 1982, Cornell University;,
J.D. 1985, Yale Law School. I am grateful to Victor Brudney, Roberta Karme, Donald
Langevoort, Roberta Romano, and Steve Thel for reading and commenting on earlier drafts
of this Article and to Gary Leibowitz for his research assistance.
I CHARLES DicKENS. OLVER TwisT 335 (Oxford Univ. Press 1966) (1838).
2 The term insider trading is generally used to describe trading in securities on the basis
of material nonpublic information about the securities themselves, the issuer of the securi-
ties, or the market for the securities. In its broadest sense, insider trading can be conducted
by those who are not typically considered corporate insiders and may include trading that
does not violate existing law as well as conduct that has been held to be unlawful. Cf. DoN-
ALD C. LANGEVOORT, INSIDER TRADING REGULATION 5 (1991) (defining insider trading as un-
lawful trading in securities by persons who possess material nonpublic information about
the company whose shares are traded or the market for its shares).
.3 See United States v. Chestman, 903 F.2d 75 (2d Cir. 1990), vacated in part on reh'g,
947 F.2d 551 (2d Cir. 1991) (en banc). After the Second Circuit overturned his criminal
conviction, Chestman attempted to modify his civil settlement with the Securities and Ex-
change Commission (SEC) on the basis that the decision in the criminal case cast doubt on
the legal basis for the civil action. The court refused to overturn the settlement agreement.
SEC v. Chestman, 87 Civ. 7148 (RJW) (S.D.N.Y. 1991); see Court Rejects Efforts by Ex-
Stockbroker to Block Payment from Settlement Fund, 23 Sec. Reg. & L Rep. (BNA) No.
10, at 369 (Mar. 8, 1991).
See, e.g., SEC-CFTC Compromise to Receive Priority When Congress Convenes in '91,
Dobb Says, 22 Sec. Reg. & L. Rep. (BNA) No. 45, at 1591-98 (Nov. 16, 1990) (reporting
suggestion by panelists at Nov. 9, 1990 Annual Meeting of ABA Business Law Section on
Federal Regulation of Securities Commission that Chestman decision could revive interest
in a legislative definition of insider trading).](ViewImageLocal?handle=hein.journals/geolr26&div=11&collection=&method=preview&ext=.png&size=3)
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Start Making Sense: An Analysis and Proposal for Insider Trading Regulation
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