Hastings Law Journal


In Chiarella V. United States, the United States Supreme Court stated that the prohibition against trading securities on the basis of material, nonpublic information applies only to those in a relationship of trust and confidence with the issuer of those securities. This Article examines the policy and purpose underlying the insider trading proscriptions of section 10(b) of the Securities Exchange Act of 1934 and of Rule lOb-5. After analyzing the judicial development of these proscriptions through Chiarella, the Article proposes an insider trading rule that is more consistent with the congressional purpose of encouraging honesty and fairness in the securities market.

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