Last updated on: 6/16/2008 8:19:00 AM PST
Which agencies are responsible for establishing and enforcing insider trading laws?
General Reference (not clearly pro or con)
"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."
2005 - Encyclopedia of White-Collar & Corporate Crime
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."
Sep. 19, 1998 - Melissa A. Robertson, JD
Thomas C. Newkirk, LLB
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... "
2003 - Thomas Lee Hazen, JD
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."
2004 - Stephen M. Bainbridge, MS, JD