Breaking Up the Focus on Relationships for Nonpecuniary Insider Trading Personal Benefits

In 1983, the U.S. Supreme Court adopted the “personal benefit” requirement as an objective test for insider trading to help determine when confidential information is tipped for an improper purpose. Under this test, a tipper acts improperly by receiving a personal benefit for sharing confidential, nonpublic information, even if the tipper does not trade using the information. For instance, when a tipper leaks confidential information to a trading friend or relative, the tipper benefits personally because this amounts to trading on the confidential information and then gifting the profits. The personal benefit requirement is applied differently among the circuits, however, and the Second Circuit has changed its interpretation of the personal benefit test three times since 2014. Currently, it requires prosecutors to show a meaningfully close personal relationship between tipper and tippee using evidence suggesting either a quid pro quo relationship or the tipper’s intention to benefit the tippee. This Note argues that personal benefit tests that evaluate the closeness of a tipper-tippee relationship detracts from the Supreme Court’s goal of separating tips leaked for proper and improper purposes. Instead, this Note proposes two distinct tests for nonpecuniary personal benefits: one test for gifts of confidential information and another test for a tipper’s intention to benefit a particular recipient. The new test for gifts would apply to anyone, not just close friends or family members, but would require prosecutors to prove the tipper’s intent to gift the information. The new test for determining whether a tipper intended to benefit a particular recipient would establish a rebuttable presumption that the tipper disclosed information for a proper purpose. The prosecution could overcome this presumption with evidence of an improper purpose for the disclosure. These two tests would help to implement the goals of securities regulation to increase the accuracy of prices, protect investors from harm, and maintain fairness and confidence in securities markets

A Regulatory Retreat: Energy Market Exemption from Private Anti-Manipulation Actions Under the Commodity Exchange Act

In order to facilitate greater reform in energy markets, Dodd-Frank granted the CFTC wide-ranging powers as part of the greater mandate given to the CFTC in relation to OTC-swaps and the daily derivatives trading activity in commodities futures and options markets. As a result, Dodd-Frank subjected electricity market transactions—which traditionally occur under the oversight of the Federal Energy Regulatory Commission in markets organized around independent system operators and regional transmission organizations—to the anti-manipulation prohibitions of the Commodity Exchange Act. Thus, differently from FERC’s regime, the post-Dodd-Frank statutory framework opened the way for enforcement of market discipline in electricity markets through a private right of action under Section 22 of the CEA. This development drew strong opposition from the industry, and also caused a conflict between courts and the CFTC in the interpretation of the relevant law. In October of 2016, the CFTC stepped back by issuing a final exemptive order to the participants of seven national energy markets, which constitute almost the entire U.S. wholesale electricity market. The withdrawal of the private right of action conflicts with the position previously advocated by the CFTC itself. It also raises questions about the CFTC’s use of its exemptive powers, as the removal of a statutory right through agency rulemaking may potentially be in conflict with the text and statutory purpose of the CEA as amended by Dodd-Frank. The exemption not only removes an important tool in enforcing market discipline, but also has the potential to undermine the reform efforts in the transition of U.S. energy markets to a smart grid. This Note will provide a history of the developments that have unfolded since the enactment of Dodd-Frank in relation to the availability of a private right of action under the CEA in energy markets. The Note also analyzes commonly raised arguments against the availability of a private right of action and presents the various counter-arguments

Coping in a Global Marketplace: Survival Strategies for a 75-Year-Old SEC

Notwithstanding cynicism to the contrary, data bears witness to the fact that government agencies come and go. There are multiple causes that give rise to their disappearance but among the most powerful is that conditions that first gave rise to the particular agency\u27s creation no longer exist so that the regulatory needs that once prevailed are no longer present or that there is a better governmental response than Congress\u27 earlier embraced when it initially created an independent regulatory agency to address the problems needing to be addressed. Certainly the more rigid the regulatory authority conferred on an agency has much to do with its ability to survive changes in the social, economic, commercial and scientific forces that shape its environment. One of the great illustrations of the vibrancy of the regulatory agency model, and particularly the notion of equipping such an agency with quasi-legislative authority through broad enabling statutes, is the Securities and Exchange Commission. But can an agency created and operating through most of its years in the internationally insulated environment of U.S. capital markets survive in a world that is light years away from the environment that existed a few years ago, not to mention 75 years ago when the SEC was created

Implementation of Directive 2004/39/EC on Markets in financial instruments (Repealing Directive 93/22/EEC on Investment services in the securities field) in Lithuania

This dissertation explores the implementation of the EU Markets in Financial Instruments Directive (MiFID) in Lithuania and identifies its impact on the Lithuanian market

Financial market frictions

Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.Financial markets

The Emperor Has No Clothes: Confronting the DC Circuit’s Usurpation of SEC Rulemaking Authority

In The Emperor Has No Clothes: Confronting the D.C. Circuit’s Usurpation of SEC Rulemaking Authority, Professor James D. Cox of Duke University School of Law & Benjamin J.C. Baucom, recent law clerk to Justice Don R. Willett of the Supreme Court of Texas, argue “that the level of review invoked by the D.C. Circuit in Business Roundtable and its earlier decisions is dramatically inconsistent with the standard enacted by Congress.” They conclude “that the D.C. Circuit has assumed for itself a role opposed to the one Congress prescribed for courts reviewing SEC rules.

Premises for Reforming the Regulation of Securities Offerings: An Essay

Cox discusses six fundamental tenets that should guide the regulation of public offerings of securities. It is assumed that regulation is to be re-examined from the ground up, with no political or regulatory constraints