Misleading Silence as the Basis for Insider Trading Liability

Date & time
1–2pm Wednesday 25 September 2019

Phillipa Weeks Staff Librar, 5 Fellows Road, Building 7, Level 4, ANU College of Law

Donna M. Nagy


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Research Office
ANU College of Law Research Seminar
Misleading Silence as the Basis for Insider Trading Liability

Insider trading law in the United States is drawn mainly from a series of U.S. Supreme Court decisions construing a broad anti-fraud rule promulgated by the Securities and Exchange Commission (SEC), the watchdog agency created by the U.S. Congress to administer the federal securities laws. As such, the jurisprudence encompasses literally hundreds of lower federal court decisions over a fifty-year span, with each one struggling to determine whether a trader, or in some instances a “tipper,” has engaged in deceptive conduct in connection with a securities transaction. With a view to the common law concept of misleading silence, the presentation contends that U.S. insider trading law would have been much more coherent, as well as far more effective in attaining Congress’s and the SEC’s policy goals, had the Supreme Court regarded the breach of a fiduciary disclosure duty as a sufficient condition -- rather than a necessary condition -- for insider trading liability under SEC Rule 10b-5. It further contends that while federal courts can still theoretically broaden their application of the common law in insider trading cases, tradition and the sheer passage of time makes the judiciary unwilling to do so. A new federal statute that would prohibit securities trading on the basis of “wrongfully obtained information” is therefore the best way forward.


  • Donna M. Nagy »

    Professor Donna M. Nagy is a leading expert on securities regulation, whose research interests include comparative regulation of insider trading in the United States. Professor Nagy is executive associate dean and C. Ben Dutton Professor of Law at the Indiana University Maurer School of Law in Bloomington, Indiana.

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