Which agencies are responsible for establishing and enforcing insider trading laws?
General Reference (not clearly pro or con)
The Encyclopedia of White-Collar and Corporate Crime (2004), volume 2, explained:
"The
regulation of insider trading in the United States rests primarily on
section 16(b) and section 10(b) of the Securities Exchange Act of
1934...
Congress did not specify the definition of insider trading as
a fraudulent act. Instead, Congress left this for the courts to
interpret. The lack of clear legislative definition allows the SEC to
construct its own interpretations, subject to judicial scrutiny. It is
on the basis of these provisions that the courts and the SEC has
exercised its authority to make the most important developments in
insider-trading law in the United States...
Furthermore, the SEC has the authority to impose criminal
penalties, civil penalties, and punitive civil awards against wrongful
traders...
The SEC was created by section 4(a) of the Securities Act of
1934 to enforce the U.S. securities regulation. Under the securities
laws the commission can bring enforcement actions either in the federal
courts or internally before an administrative law judge. It is the most
powerful securities regulator in the world."
Thomas Newkirk, LLB, former Associate Director, and Melissa A. Robertson, JD, Senior Counsel, of the Division of Enforcement of the US Securities Exchange Commission (SEC), in their Sep. 19, 1998 speech "Speech by SEC Staff: Insider Trading – A U.S. Perspective," explained:
"Rooted
in the common law tradition of England, on which our legal system is
based, we have relied largely on our courts to develop the law
prohibiting insider trading. While Congress gave us [the US Securities
Exchange Commission] the mandate to protect investors and keep our
markets free from fraud, it has been our jurists, albeit at the urging
of the Commission and the United States Department of Justice, who have
played the largest role in defining the law of insider trading."
Thomas Lee Hazen, JD, Cary C. Boshamer Distinguished Professor of Law at the University of North Carolina at Chapel Hill School of Law, in his 2003 Federal Judicial Center publication Federal Securities Law, wrote:
"Congress
enacted the Securities Exchange Act of 1934, extending further
regulation over a wider range of participants and transactions in the
securities industry. Since the 1934 Act greatly increased the required
administrative responsibility, Congress established the Securities and
Exchange Commission. The 1934 Act regulates all aspects of public
trading of securities...
The federal securities laws are administered by the Securities and
Exchange Commission (referred to alternatively as the SEC or the
Commission). The SEC is a true 'superagency' and exercises most
administrative powers, with one exception: It cannot adjudicate
disputes between private parties...
The SEC's role in administering the securities laws takes two
basic forms: direct SEC regulation through rules, orders, and
enforcement; and an elaborate system of industry self-regulation
carried out under SEC supervision and oversight. The self-regulatory
organizations (SROs) include the securities exchanges, such as the New
York Stock Exchange (NYSE), the National Association of Securities
Dealers (NASD), and the Municipal Securities Rulemaking Board, which
establishes rules governing municipal securities dealers.
Self-regulatory organizations have their own membership criteria, rules
of operation, and disciplinary procedures, all of which are subject to
SEC review.
Much of the SEC's rule-making power derives from sections of
the securities laws that specifically empower the SEC to promulgate
rules that have the force of statutory provisions. Rule making by
direct legislative delegation necessarily has the effect of law so long
as it is carried out according to statute...
The SEC is empowered to investigate suspected violations of the
securities laws. Most investigations are conducted with a view toward
initiation of SEC administrative proceedings, initiation of SEC
enforcement actions brought in federal court, or referral to the
Department of Justice for criminal prosecution... "
Stephen M. Bainbridge, MS, JD, William D. Warren Professor of Law at the University of California, Los Angeles (UCLA) School of Law, in his 2004 essay "An Overview of US Insider Trading Law: Lessons for the EU?", wrote:
"Although
the modern insider trading prohibition technically is grounded in the
federal securities regulation statutes, most notably Rule 10b-5
promulgated by the Securities and Exchange Commission (SEC) pursuant to
the authority granted it by Section 10(b) of the Securities Exchange
Act, the prohibition in fact evolved through a series of judicial
decisions in a process more closely akin to common law adjudication
rather than statutory interpretation."
