The Research of Insider Trading in Securities Regulation in The View of Economic Analysis

• Main Authors: Kuo-Pin Lu, 呂國平
• Other Authors: Kai-Yuan Lee
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/a6mudz

碩士 === 銘傳大學 === 法律學系碩士班 === 95 === The stock market is the window of the economic developments.It’s the place for companies to raise capital easily. The investors will get enormous profit losses when a corporate insider purchases or sells securities on the basis of material, non-public information .Insider trading is harmful for trading order and destroy the confidence of investors and thus lessens both liquidity and investment in the stock market. For instance, the Enron and Worldcom debacles led to significant new developments in the area of enforcement and disclosure. First, pursuant to the Sarbanes-Oxley Act enacted July 30, 2002 to increase the public confidence in the U.S. public securities markets. U.S. insider trading regulation can best deter unlawful activity and support and promote the integrity of the securities markets if it more clearly and precisely identifies and punishes those who undermine or challenge that market integrity by engaging in transactions based on their privileged access to significant, undisclosed information. Insider trading occurs frequently in the Taiwan stock market. For instance, Lee Jin-chan the chief of The Financial Examination Bureau disclosed material, nonpublic information（accounting fraud）to Lin Ming-dar and his friends and they all used the information to sell stock in the Taiwan listed company, Power Quotitent International Corporation, that they have traded on profitably. Recently, Dr. Chao Chien-ming, President Chen Shui-bian’s son-in-law was held incommunicado at the Taipei detention house in Tucheng on suspicion of insider trading on May 25, 2006. He was notorious all over the world. From the mentioned above, the issue of insider trading has never disappeared from academic and public policy debates during the past four decades, and this practice has attracted a great deal of publicity and near-universal condemnation. Recently, and in the wake of the stock market decline and numerous corporate scandals, insider trading, treated as one of the chief symptoms of the business world''s corruption, once again captured public attention. In order to avoid deterring investors from making trades in the future, the insiders should be punished for trading based on the information in most countries. However, many law and economic scholars have argued that market efficiency as a goal is consistent with the idea of easing restrictions on insider trading. This research primarily focuses on “Is it necessary that insider trading should be punished？” by the view of economic analysis . The scheme of the research comprises seven parts as follows： Part I illustrates the motives, goal, methods, limitations and realm of this paper. Part II illustrates some fundamental concepts and theories. For example, maxmizing utility, efficiency and equity, Game Theory, Coase Theorem etc. Part III focuses on the brief introduction about the definition of insider trading and the necessity that insider trading should be punished. Part IV discusses the basic structure of insider trading regulation in the United States. This Part reviews the common-law development of insider trading laws under section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 promulgated thereunder. In doing so, this Part examines the four theories of insider trading：the disclosure or abstain , fiduciary duty ,classical and misappropriation theories. Misappropriation liability is an insider trading theory of relatively recent vintage, only having been endorsed by the U.S. Supreme Court in 1997. Accordingly, there is much room for interpretation of its various facets. Part V explores the insider trading regulation in Taiwan. Meanwhile, this Part discusses some case of the insider trading in Taiwan by the view of economic analysis Part VI bases its interpretation in the view of economic analysis, by which to explore the problems of insider trading, such as Pareto efficiency, the noise theory, the random walk theory and efficient market hypothesis. This Part also discusses the correlation of increasing the punishment and reducing the crime of the insider trading by the analysis of regression. Part VII ultimately concludes this research.