Enforcement of insider-trading regulations is currently a high priority for the Securities and Exchange Commission (SEC). This is unsurprising, as the SEC tends to enforce insider-trading laws more vigorously when markets are volatile. But where should the SEC focus its investigations? This Comment argues that the SEC should concentrate on enforcing insider-trading regulations most vigorously against individuals who are not employees or directors of the corporation whose shares are being traded. In contrast, the SEC should regard as a lower priority the enforcement of insider-trading regulations against that corporation’s employees and directors. Companies are capable of taking various forms of action against their own employees and directors who trade in their own stock. But more importantly, as this Comment will show, the companies also have the power to permit insiders to trade on inside information in their own stock.
The author is a third-year student at the Yale Law School.
