Index

Aaron v. SEC 49 balance of problems 398–9 “access insiders” 416 Balkenhol, Carolyn 191 accountability 172, 181, 323–4, 326 Bank of the United States 172 accredited 105–6 bankruptcy 115, 263–4, 335 ACT Party (NZ) 395 baokuo 332 activist investors 235–7, 239–40, 246, 249 Basic v. Levinson 450 administrative costs 30 Bastiat, Frédéric 252–3, 254 administrative enforcement 194 Baxt, Robert R. 380, 381 China 214–16, 318, 328, 330–31, 341 Beatty, Ted 132, 133, 138, 140 administrative liability 315, 316 Beck, Thorsten 282, 285–6 Administrative Procedure Act 33 Becker, Gary 273 administrative proceedings 358–60 Bei Dong 125 Administrative Punishments Law 344 Beijing Zhongguancun 321 Affiliated Ute Citizens 47–9, 50 “beneficial ownership report” 239 affirmative defenses 398–400, 463, 468 Bentsen, Senator Lloyd 169 agency costs see costs Beny, Laura N. 255, 258 agency problems 410 Bernstein, William 62 Agrawal, Anup 126, 467 Betton, Sandra 460–61 “agreement-in-principle” test 438 Bharara, Preet 137 AIG 181 Bhattacharya, Uptal 51, 255, 271, 281, 285, 289 Alliance for Education 274 Bhide, Amar 257 American Commercial Airlines 122 bid-ask prices 28–9, 125, 134–5 Amex 264 bidders Amihud, Yakov 271 trading by 18, 449–50, 458, 460–65 Anisman Report 366, 367–8, 374 binomial pricing model 223–4 “any person” regime 16, 396 Black, Ashley 380, 381 “appearing and practicing” 100 Black case (Christopher A. Black) 122 arbitrageurs 233 Black Monday 390 Armed Services Committee 160 Blackmun, Justice 47, 48–9, 50, 188 Asia see China; Japan Blau v. Lehman 35–8, 40, 44 ASIC v. Citigroup Global Markets 371, 378–9, board of directors 3, 4, 54, 138, 157, 239, 381 257–8, 262, 357, 393 Asquith, Paul 220 Boehner, John 180 Australasia 16–17 Boesky case 131–4, 138, 139, 145 see also Australia; New Zealand Boller, Gregory 169, 170 Australia 16, 365–85 Boone Pickens, T. 237 ASIC 366, 382–5, 402 Bostock, T.E. 372–3 ASX 365, 373, 383–4 Boyen, Philip 423–4 enforcement 383–5 Bradley, Michael 263–4 exceptions and defenses 380–82 Brav, Alon 236, 240, 241 legislation (present) 368–79 Brennan, Justice 48 legislative background 365–8 bribery 168, 172, 177, 179, 309 penalties 382–3, 385 see also payoff devices Austrian School of Economics 68–9 Bris, Arturo 269 Avon 124 Brockner, Joel 188 Brophy v. Cities Service Co. 158 Bacanovic, Peter 63–4 Brudney, Victor 186–7 Bainbridge, Stephen M. 153–4, 160, 163 bull market (in China) 319

469 Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 469469 227/03/20137/03/2013 12:2112:21 470 Research handbook on insider trading

burden of proof 358, 380, 426 sanctions and penalties 341–2, 344 reverse of 312, 340, 341 statute and guidance 342–4, 346 Burger, Chief Justice Warren 49–50 China (regulation law) 17, 303–26 Burke, Edmund 178 background (overview) 303–7 business cycles 260, 263, 265 cases (1991–2011) 318–22 business lawyers 100–101 enforcement mechanisms 316–26 Business Week 256 enforcement regime 327–46 buy-backs 380, 431 key elements 307–16 buyers 105, 106 China Securities Regulatory Commission (CSRC) 328 Cady, Roberts & Co. 3–4, 9, 34–5, 37–9, 47–8, enforcement regime 331–5, 337–44 82, 98, 137, 331–3, 344, 351 legal/regulatory norms 329–30 California Department of Corporations 101, regulation of insider trading 304, 306–13, 102, 105 315–16, 318, 322, 325 call options 131 sanctions and penalties 341–2 USA 212–14, 222–3, 226–7, 229 statutory provisions 345–6 call , implied 223–4, 226–8 Chinese wall defense 379, 380–81, 399 capital Citadel Investments 212 allocation 270–71 Citigroup 124 asset pricing model 255 Citigroup case 371, 378–9, 381 Capital Gains Research Bureau Inc. 3–4, 33–51 City of London 17, 206, 407, 409, 410 capital markets 99, 345 civil cases (China) 17, 322, 323–6 effect on trading 19, 21, 251–65 Civil Code (Japan) 350 efficiency 13, 171, 268, 271–2, 453 civil damages (China) 341–2 EU 429, 444, 448 civil law 259 legal origins theory 19, 276–7, 279, 285, political economy and 276–7, 279, 282, 297–8, 303 289–90, 292–5, 297 liquidity 133–4 UK 17, 407, 409, 428 political theory 19, 266–98 civil liability UK 407, 408, 409 Australia 365–6, 369, 382 USA 91, 114, 133, 141, 147, 163, 211 China 316, 317, 324 Carpenter (mining company) 373–4 NZ 400 Carpenter case 24–5, 84, 85, 96 UK 419, 420, 422 Cary, William 34–5, 37, 46–7, 351, 361 USA 244 casino markets 328, 345 Clark, Judge Charles 35–8, 40–47, 51 causation 10, 53, 54–5, 57, 66, 325 Clark, Robert C. 186–7, 324 cease and desist orders 119, 124, 443 classical insider trading 18, 56–7, 108–9, 139, Center for International Development 157–9, 331–3, 449, 450, 463–4 and Conflict Management 282, 285 Closer Economic Relations (CER) Central Intelligence Agency 282, 285–6 Agreement 387, 395, 400 central planning 260–61 co-determination laws (EU) 434 centrist governments 19, 267, 283, 290–95, 298 cognitive neuroscience 61–2 CEO pay 235–6, 241–2, 249 Cohen, Lauren 467 Changjiang Konggu case 320–21 Coleman v. Myers 388 Chen Jianliang 324–5 Collotta, Randi 191 Chen Ningfeng v. Chen Jianliang 324–5 Commerce Committee (NZ) 387, 402 Chen Zuling v. Pan Haishen 310, 325 Commercial Code (Japan) 350 Chestman case 12–13, 86, 87, 193, 202 Commissioner for Corporate Affairs v. Chiarella v. US 5–11, 15, 23, 25, 28–9, 48–50, Green 370 80–84, 86–7, 97, 112–14, 156, 188, 213, Committee of European Securities 233–4, 314, 331–3, 344 Regulators (CESR) 451 Chiesi, Danielle 191, 203 Commodity Exchange Act 155 China (enforcement regime) 17, 327–46 common law 9, 38, 42, 46, 82–4 insider trading regimes 331–41 Australia 365 legal/regulatory norms 329–30 China 342

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 470470 227/03/20137/03/2013 12:2112:21 Index 471

NZ 386, 387, 388–9 corporations political economy and 276–7, 279, 282, entrepreneurship 22–3, 67–79 289–90, 295, 297 trading by 463–4 UK 409, 410 Corporations Act (Australia) 367, 380, 382–3, common /options 18, 102, 212 395, 396 Commonwealth DPP 366, 384 Corporations Law (Australia) 367–9, 372 Commonwealth Government Corporations corruption 163, 428 Law 367, 368–9, 372 governmental insider trading as public communications technology 375, 376 14–15, 168, 171–6 Companies Acts (NZ) 387, 389–90, 400–402 harms of 176–83 Companies Acts (UK) 410 political economy and 283, 286, 290–92, Company Law of the PRC 305 294–5 compensation 132 private 168, 183–9 civil (China) 324–5, 342 costs efficiency 21–3, 96, 135, 245 administrative 30 entrepreneurs 14, 67–79, 95, 166, 253 agency 135, 141, 146, 149, 185, 270 orders (Australia) 382–3 of capital 271 orders (NZ) 400 decision 30, 130, 136, 139–40, 142, 146 computer hacking 88–9 distraction 181, 186–7 confidence, duty of 463 of equity 254–5 gender and 193, 196, 200, 203–5, 207 error 30, 130, 136, 138–42, 146, 149 USA 13, 39, 48, 86–7, 90, 139, 157–60, 163 information 22, 95 confidentiality 114, 160 legitimacy 181–3, 187–9 agreement 457, 459, 462 of private corruption 185–9 fiduciary duty 11, 12, 39, 87–8, 416 of public corruption 176–83, 184 key elements of prohibition 11, 12–14 social 267, 270–72, 275 Congress 13–15 sunk 91–2 governmental trading 14–15, 166–90 temptation 177–81, 185–6 political intelligence 15, 153–65 counter-party 106–7, 108, 109 role of SEC see Securities and Exchange Cowdin, J. Cheever 3 Commission (SEC) creative destruction 70–71 STOCK Act 15, 153–65 credit crisis (2007) 424 constructive insiders 11, 108, 159, 162, 214, Credit Mobilier bribery scandal 172 308, 314, 319, 409, 432, 443 credit-rating agencies 114 Continental Tyres 465 credit-rating approach 255 contract partners (Japan) 355–6 criminal cases (prosecutions) 244 contractarian approach 30, 130, 137, 140–42, Criminal Code, Commonwealth 380 143, 146 Criminal Enforcement Explanation 318 control person liability 93–4 329–31, 336, 339, 341, 343–5 Cooke, Justice 388 Criminal Justice Act (1993) 17, 407, 410–14, copyright 91, 92 418–19, 420 Corporate Code (Japan) 350, 355 criminal law corporate culture 77 China 310–11, 315–17, 329, 336, 341, Corporate Fraud Squad (NZ) 402 343–4 corporate governance 274, 275, 407 UK 17, 407–9, 412, 419, 422, 428 corporate insider trading 10–12, 29, 161, 163, criminal liability 268–9 Australia 365–6, 369, 382 governmental trading and (lessons) 14–15, China 316–17, 320–21 166–90 NZ 400 as private corruption 183–9 UK 410–11, 412, 422 theories 156–8 USA 244 corporate law 348–50 Cuban case (Mark Cuban) 87 corporate plans, interference with 26–7 cultural influences/patterns 59–60, 65 corporate takeovers see takeovers Curtiss-Wright Corporation 3 corporate value 258, 259 custody/custody transfer 312

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 471471 227/03/20137/03/2013 12:2112:21 472 Research handbook on insider trading

damages 215, 341–2 NZ 403–4 Daouk, Hazem 255, 271, 281, 285, 289 risk of early 92–3 deceptive conduct 162–3 selective 6, 113, 122–4, 125–9 decision unauthorized 417–18, 424–5 costs 30, 130, 136, 139–40, 142, 146 distraction costs 181, 186–7 making (corruption harms) 177–83, 185 distributional effects 268–70 theory 30, 130–49 Dodd-Frank Act 123, 156 deeming 378–9 Dong Zhengqing case 321 Defense Department 178 Dooley, Michael P. 81 defenses, affirmative 398–400, 463–4, 468 Dorozhko 88, 89 delay, disclosure 144–5, 403 Douglas, Michael 251 delay (injury to issuer) 26 Douglas, William O. 33, 34, 36, 37, 51 Deloitte Tax L.L.P. 202–3 du Plessis, Jean J. 373 democratic process 173–4, 181 Duer, William 168–9 democratic systems 19, 267, 277–9, 283, 286, duration analysis 279–81, 291–6 291–6, 298 Durbin, E.F.M. 260 demographic minorities/majorities 204–5 duty 138–9, 421–2 Deng Jung & Qu Li case 313 of disclosure see disclosure Denis, Diane 220 Dynegy, Inc. 132, 140 Department of Justice 18, 211, 215–17, 228, 230, 243, 244, 247 efficiency 134, 268 Depository Trust Company 124 13, 171, 268, 271, 453 deregulation 19–23, 28, 134, 255 compensation 21–3, 96, 135, 245 derivatively informed trading 21 informational 135, 142, 149 derivatives trading 238, 353, 414, 415, 465 market 21, 30, 146, 260–61, 272, 466 detection risks 57–9, 60, 64–5 135, 271–2 Devlin, Matthew 202 Eggers, Andrew 170–71 Devlin, Nina 191, 202 Einhorn, David 425, 454 Diamond v. Oreamuno 186 Eisenhower administration 34, 42 Dickson, H.D. 260 employees Diet (Japan) 18, 347–8, 352, 354, 358, 361 EU 432 directors 10–11, 258, 350, 409, 463 fairness perceptions 187–8 China 307, 314 government officials 15, 153–65 EU 432 as insiders 10–11, 307–8 male/female 198–9, 205 Japan 355 NZ 389–90, 393 salary see salary see also board of directors trading by 18, 449, 463–4 Dirks v. SEC 6–12, 15, 25, 28, 80–84, 86, 96, enactment of legislation (duration 112–14, 138, 140, 155, 157, 159, 161–2, analysis) 280–81, 284, 287–93, 296–7 164, 207, 213, 233, 314 enforcement “disclose or abstain” 3–5, 88, 96, 106, 109, 137, administrative see administrative 161, 164, 213–14, 233 enforcement disclosing offense (NZ) 398–400 Australia 382, 383–5, 402 disclosure 20, 43 Capital Gains Research Bureau 37–45 -based regime 30, 130–49 changing demand for regulation 29, 242–4, delayed 144–5, 403 250 duty of 38–41, 46–8, 50, 52, 82, 84–5, 88, 97, China 17, 303–26, 328–9 433–4 duration analysis 280–81, 293–6 EU 17–18, 431, 433–4, 445, 447–8, 454, EU 449 456–60, 465–6 gender and 194–6, 201 fiduciary duty 9–10, 12, 28, 80–82 intensity (USA) 18–19, 211–29 information asymmetry 6–7, 112–14, 116, Japan 347, 359–60 117–19, 121–9 NZ 16, 386, 391–2, 394–5, 401–4 injury to investors/issuer 23–7 political economy of 19, 266–98 mandatory 18, 449, 458–60, 466 private see private enforcement

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 472472 227/03/20137/03/2013 12:2112:21 Index 473

public see public enforcement governmental insider trading 182–3, 187–8 Regulation FD 117–23 market (Australia) 367–8, 369 UK 17, 408, 423, 424–7 family 192–4, 204 US mechanisms (trends) 214–29 FBI 211–12, 217, 251 entrepreneurship 95, 261 “federal fiduciary principle” 83 compensation and 14, 21–3, 67–79, 95, federal law/enforcement 9–10, 213–19 166–7, 253 Federal Reserve Board 163, 180 equal access 4–5, 6, 23, 28 federalism 9–10, 28, 83 Australia 367–8, 369 feminism 196, 204 China 314, 316, 331–3 Ferenbach, Carl 396 NZ 388 fiduciary duty/relationship post-fiduciary duty era 15–16, 80–98 Australia 367 equity-based compensation 71–2 China 315–16, 331, 333 equity costs 254–5 EU 443 Equity Funding of America 132, 140 investment advisers 38, 40–41, 44–6 Erbitux 64 Japan 349–51, 356 error costs 30, 130, 136, 138–42, 146, 149 liability effect 15–16, 80–98 Espen Eckbo, S. 461 NZ 388–9 Etebari, Ahmad 403, 404 political intelligence 15, 154–5, 157–9, ethics 155, 159, 160, 174, 179 161–2, 164 Europe state of mind and 10, 52, 55–6 anatomy of law 430–43 UK 408–10, 416–17 current reforms 440–43 USA 4–6, 9–13, 25, 28–9, 106–8, 145, 186, differences in law 443–8 213–14, 233 insider trading law (overview) 17–18, finance 429–48 investor model 274–6, 279 takeover bids 18, 449–68 legal origins theory 19, 266–8, 276–7, 279, European Central Bank 431 285, 297–8, 302 European Court of Justice 17, 430, 434–40, political theory 277–9, 298 444, 447, 452, 457, 462, 463, 468 Financial Conduct Authority 425, 426–7 European Parliament 429 financial markets European Securities Markets Authority Japan 353, 355, 358–9 (ESMA) 451 NZ 386–8, 390, 395–6, 400–403 European Transparency Directive 464, 465 UK 425, 426, 427 European Union Financial Markets Authority (FMA) 387, 390, Insider Dealing/ 400–403 Directive 17, 407, 422–4 Financial Markets Authority Act (2011) 395, Market Abuse Directive 419–21, 430–38, 400–401 440–42, 44–5, 447, 465–7 Financial Markets Conduct Bill (2011) 386, Evans case 162 387–8, 395, 396 exceptions 380–82 Financial Markets Tribunal 425 see also safe harbors Financial Products Trading Act 353, 355, ExecuComp 235 358–9 executives (male/female) 198–9 Financial Services Act (1986) 411 expert network firms 218–19 Financial Services Act (2010) 426 Financial Services Authority 17, 408–9, 418, face-to-face transactions 3 420, 421, 462 Facebook 128 Financial Services Bill (2012) 425–7 effect 15, 99–111 Financial Services and Markets Act failure to understand/properly apply 60–61 (2000) 17, 407, 418, 419, 420 Fair Shares for All 388 fines 382, 400 “fair value” (NZ) 389–90 China 321–2, 341 fairness 77–8, 113, 137–8, 163 UK 424, 425 argument 134, 443–4 USA 215, 230 definitions 23 firm-specific information 270–71

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 473473 227/03/20137/03/2013 12:2112:21 474 Research handbook on insider trading

Firns case 368, 373–4 Gourevitch, Peter A. 277 First Third Bancorp 123–4, 127 Government Accountability Office 153, 155 fixed trading plan (NZ) 399 government officials (political flexible/remedial principle 47–51 intelligence) 15, 153–65 flipping 59, 63 governmental insider trading (lessons) 14–15, Flowserve 118 166–90 FMC Corp. v. Boesky 131–4, 138, 139, 145 evidence of 168–71 Folger, Roger 187–8 harms of public corruption 176–83 “follow the money” 101–3 private corruption 183–9 Food and Drug Administration 63, 65 as public corruption 171–6 Form 8-K 114, 122, 124, 128, 334, 339, 434 greed 10, 23, 52, 53–4, 62, 65–6, 252 former insiders (Japan) 356 Green case 370 Fox News 202 Greenberg, Judith G. 192–3, 194, 196 fractionalization (legislature) 282, 285 Greenlight Capital 425 fraud 9, 112, 351 Griffiths Report 366–7, 368, 369, 375–6 Capital Gains 38–9, 41–2, 45–6, 49 Grøngaard & Bang case 434–5, 436, 457 decision theory 132–3, 137–40, 147 Groupon 99 post-fiduciary duty 88–9, 96 growth enterprise market (GEM) 306 state of mind 10, 49, 52–66 Guang Yawei case 321 free-rider problem 274, 392–3, 403, 460 Gupta, Rajat 101, 218, 449 Fried, Jesse 142 Friendly, Judge Henry 41–3, 44, 47 hackers 88–9 front-running 315–16, 328 Haddock, David D. 29, 232–7, 241–4 fundamental attribution bias 66 Hainmueller, Jens 170–71 Hall, Tammany 176 Gabaldon, Theresa A. 196–7 Hamilton, Alexander 168 Gadarowski, Christopher 125 Hangxiao Ganggou case 321 Galleon Group 109, 203, 211, 215, 217–18 Hannam, Ian 425 Gannon, Kathryn (a/k/a Marilyn Star) 191 Hannes v. DPP (No 2) 371 GDP per capita 283, 285, 291–2, 294–5 Hanrahan, Pamela F. 380, 381 Gao Yangcai case 321 Harlan, Justice John Marshall 45 Geisst, Charles 168–9 “harmonious interpretation” 430 Gekko, Gordon (in Wall Street) 251 Hart, Carolyn 221 Geltl v. Daimler 436–40, 446, 447, 452, 468 Harvey, Campbell R. 223 gender 15, 191–207 Hawkins Delafield 132 -construction norm 200–204 Hayek, Friedrich A. 19, 253, 254, 261–2, 263, empirical work needed 204–7 265 inquiry/analysis 192–9 Hays, Judge Paul 42, 43, 44 pillow talk cases 191, 193, 200–204 hedge funds role (in US law) 15, 191–207 role 235, 236–42, 244, 246, 247 sex and (interaction) 197–9 targeting 248–50 gendered principles 192–7 Heffernan, William C. 172, 183–4 general availability (information) 371–7 Hefner, Christie 191, 202 Georgakis case 435, 436 Henderson, M. Todd 139, 167, 246 German Federal Court of Justice 438 Hermès 465 Gilbert, Aaron 403, 404 Heron, Justice 392–3 Gilson, Ronald 143 HGSI 218 Ginsburg, Justice 10, 84–5 Hideki Kanda 350 Gintel, Robert M. 3 Hochfelder case 50 GLG Partners 420 holding period 106 globalization 16–18 Holwell, Richard J. 251, 253, 264–5 Goldberg, Justice Arthur 45, 46 Hooker Investments v. Baring Bros 370–71 Goldman, Kenneth 119, 120 hornbook fiduciary relations 12 Goldman Sachs 101, 131, 203, 217–18, 249, hostile deals/offers 247, 460, 464 420, 449 House Appropriations Committee 178, 181

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 474474 227/03/20137/03/2013 12:2112:21 Index 475

House Committee on Ethics 155 innovation 22, 67, 69–71, 74, 77, 95, 166–7 House Ethics Manual 174 inside information House Subcommittee on Domestic definition (Australia) 371–9 Monetary Policy 180 definition (China) 309–10 Huang Guangyu case 321–2, 323, 325 definition (EU) 442, 445–7, 450–56 Huang Hui 336 definition (in MAD) 432 definition (UK) 422–3 IBM 128, 203, 211 disclosing (professional context) 434–5 Ichan, Carl 237 disclosure (EU) 456–60 ideology 19, 259, 267, 277–9, 283, 286, 290–98 market information and 8, 14 ImClone 63–4 preliminary 436–40 implied volatility 223–4, 226–8 prohibition on using (in MAD) 433 incentives 92–3, 95 inside knowledge, use of (in capital see also compensation markets) 262–4 increased illegal trading hypothesis 212–13 insider dealing increased intolerance 212 market manipulation and 441–3 independence, accountability and 323, 324, 326 UK 17, 407–28 index futures 326 Insider Dealing and Market Manipulation index traders 269 Directive 17, 407, 422–4 information Insider Dealing Directive 411, 414 access hypothesis, gender and 198 insider trading costs 22, 95 classical theory 157–9, 314, 331–3 definition (Australia) 370–71 corporate see corporate insider trading efficiency 135, 142, 149 effect on capital markets 19, 21, 251–65 equal access see equal access enforcement see enforcement inside see inside information EU (overview) 17–18, 429–47 market 8, 14 gender and 15, 191–207 material see material, nonpublic information; increased in US (evidence from takeovers) material information 18–19, 211–29 misappropriation see misappropriation mixed bag practices 30, 130–35, 149 nonpublic see nonpublic information optional disclosure-based regime 30, 130–49 not generally available 371–7 policy see policy precision 439, 446, 447 political economy of 268–73 preliminary 436–40 post-fiduciary duty era 15–16, 80–98 price-sensitive see price-sensitive information prosecutions 242–4, 247, 320 property rights in 90–97 regulation see regulation relating to shares/issuer of shares 454–6 reporting of trades 464–7 theory 49 revolution (launching) 3–4, 33–51 traders (potential losers) 269–70 startup companies 15, 99–111 see also knowledge state of mind (scienter requirement) 10, information analysis 376–7 52–66 information asymmetry 24, 35, 106, 443 takeover bids (EU) 18, 449–68 gender and 198, 204, 205 theories (prior to STOCK) 156–8 Regulation FD 7, 112–29 US law (overview) 1–30 “information insider” (NZ) 397–8 Insider Trading and Securities Fraud Informed Insider Report 146, 149 Enforcement Act (1988) 94, 189, 215 Informed Outsider Report 146, 149 Insider Trading and the Stock Market Informed Trading Database 145–7 (Manne) 14, 19, 166, 252 Informed Trading Reports 145–6, 148 Insider Trading Directive 296 initial public offerings (IPOs) 15, 63, 99–100, Insider Trading Guidance Provisions 103–4 (China) 328, 330–32, 335, 337–46 injury insider trading law to investors 23–5 current reforms (EU) 440–43 to issuer 25–7, 94 enactment (duration analysis) 280–81, to reputation 27 291–3

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 475475 227/03/20137/03/2013 12:2112:21 476 Research handbook on insider trading

enforcement see enforcement injury to 23–5 extent of (China) 306–7 Japan 18, 347–8, 361 globalization of 16–18 NZ 390 NZ 16–17, 386–404 protection 445 overview 1–30 reasonable see “reasonable investor” policy debate 19–30 small 269–70 political economy of 19, 266–98 UK 407, 422 scienter requirement 10, 52–66 invisible hand 251, 252 stock market and 254–60 issuer 105 US federal (overview) 213–19 injury to 25–7 Insider Trading Sanctions Act (1984) 110, 215 of shares (information) 454–6 insiders 9 websites 126–7 classical 18, 56–7, 108–9, 139, 449–50, 463–4 “issuer disclosure rule” 114 constructive see constructive insiders definition (Australia) 369 Jabre case 420–21 definition (China) 307–9 Jacobson, Justice 378 definition (in MAD) 432 Jagolinzer, Alan 246 former (Japan) 356 Japan (insider trading regulation) 18, 247–61 managers of public companies 29, 232–5, amendments (1988) 354–8 238, 242–50 economy 360–61 nontraditional 432, 443, 445, 448 insider trade law 348–60 potential defendants 10–11 reforms (2004) 358–9 primary see primary insiders Jarrell, G. 220–21 secondary see secondary insiders Jensen, Michael C. 74 Institutional Investor Online 274–5 jiaoda 335 institutional investors 238, 269–70, 274–5 Jiau, Winnifred 191 insurance 58, 304, 337 Journal of Financial and Quantitative companies 181, 240, 269 Analysis 169 integrity (of markets) 443–5 Judicial Interpretation on Insider Intel Corporation 211, 217 Trading Law in Criminal Cases 305, 309, Intelligence Committees 160 312, 313, 317 intentionality 53–4, 66, 336, 358 junk bonds 237 scienter requirement 10, 52–66, 311, 335 jurisprudence 19 interference (with corporate plans) 26–7 China 331–3, 337 Intermediate People’s Court Japan 351–2, 354 of Guangzhou City 309 USA 1, 10, 16, 33, 48, 50, 80, 83, 89, 416 of Nanjing 325 International Organization of Kahn v. Kohlberg Kravis Roberts 158 Securities Commissions (IOSCO) 408 Kaplan, Steven N. 241 internet 7, 116, 124, 126–7, 128, 129 Kaufman, Judge Irving 42 INTRES/Resources 285–6 Kennedy administration 34, 42 investment advisers 33, 38, 40–41, 44–6, 247–8 Keown, Arthur J. 220, 221 Investment Advisers Act (1940) 33, 38, 40, 44, Kerry, Senator 181 45–6 Khuzami, Robert 248 Investment Company Act 238 Kindleberger, Charles 62 investments Kirzner, Israel M. 68 qualifying 420–21, 422–3 Kleinig, John 172, 183–4 toehold see toehold investments Knight, Frank 69, 72 investor model 274–6, 279 knowledge Investor’s Clearinghouse 274 definition (Australia) 370–71 investors local (role) 21, 253, 254 accredited 105–6 objective/subjective (tests) 311 activist 235–7, 239–40, 246, 249 role (China) 336, 337–41, 343 confidence 189, 190 use of 260–64 EU 435, 445 see also information

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 476476 227/03/20137/03/2013 12:2112:21 Index 477

Kobayashi, Bruce H. 164 local knowledge 21, 253, 254 Koehler, G. 223 London 410 Konovsky, Mary 187–8 Lopez-de-Silanes, Florencio 303 Kraakman, Reinier 143 losers, potential 269–70 Kruse case 373–4 loss 252 Kuang Yong case 311 avoidance 22, 95–6 Loss, Louis 34, 45 La Porta, Rafael 282–3, 285–6, 303 Louis Harris and Associates 256 labor 68, 297 loyalty 12, 139, 144, 158, 350 market 141, 144–5, 278 Lumbard, Judge 41, 42, 44, 47 laissez-faire approach 30, 130, 137, 140–43, Lund case 11 146 LVMH 465 Landis, James 34 Lyon, Gregory 373 Lange, Oskar 260, 261 last period agency costs 185 McClellan, Annabel 191, 202–3 left-leaning governments 19, 259, 267, 278–9, McConnell, John 220 283, 290–98 Macey, Jonathan 29, 232–7, 241, 242–4 legal authorities (Japan) 355 McInerney, Justice 370 legal liability (China) 315–17, 320–21, 324, McKenzie, Peter 402 333–4, 336–7, 342–3 McKinsey & Co. 101, 211, 218 legal origins theory 19, 266–8, 276–7, 279, 285, Magnum Corporation 392 297–8, 303 Mahaffy 89–90 legal status quo 137–43, 145 Mahon, Justice 388 legislator (potential defendant) 13–15 “major events” 310 legislature fractionalization 282, 285 Malley, Christopher 466–7 legitimacy Mamma.com Inc. 87 costs 181–3, 187–9 Managed Fund Association 249 cultural/social 59–60, 61, 62, 65 Manaster, S. 223 Lehman Brothers 35, 37 mandatory public disclosure 18, 449, 458–60, Lerner, Abba P. 260 466 Leung, Charlott Ka On Wong 191 manipulative securities trading 330 level playing field 103, 106, 108–9, 129, 137–8, Manne, Henry G. 14, 19–22, 95, 154, 163, 244, 249, 345, 445 166–8, 177, 185, 188, 190, 252–4, 265, Levine, Dennis 256 444 Levmore, Saul 186 Maori Party (NZ) 305 liability 112, 122, 452 trading 238 civil see civil liability Marin, Jose M. 264 criminal see criminal liability Marino, Edward 122 decision theory 130, 136, 146–9 market-for-lemons problem 245 legal (China) 315–17, 320–21, 324, 333–4, market(s) 336–7, 342–3 capital see capital markets post-fiduciary duty 84, 86, 88, 93–4, 96 duty to 421–2 tippee 148–9, 336, 343 economy 260–61 tipper (China) 333–4, 336, 343 efficiency 21, 30, 146, 260–61, 272, 367, 466 tipper–tippee 108–9, 159, 161–2, 164 failure 267, 272 Limitation Act 1980 (NZ) 394 fairness see fairness Lina, Serenella 191 gendered roles 192–3, 194 Li Qihong case 308–9, 321, 323 insider trading harmful to 260–64 liquidity 104–5, 111, 133–4 integrity of 443–5, 447–8 market see market liquidity manipulation (EU) 429, 431, 435, 441–3 traders 269–70 misconduct (UK) 17, 407–28 transaction costs and 254, 270–72 prescribed (UK) 420–21 litigation 161, 245 regulated (beyond) 441–2 Liu Baochun case 321 secondary see secondary markets lobbying/lobbyists 155, 156, 172, 249 stock see stock market

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 477477 227/03/20137/03/2013 12:2112:21 478 Research handbook on insider trading

supervision by ASIC 383–4 Australia 367 surveillance 383, 402 China 17, 309, 314–16, 331, 333–4, 336–7, market abuse 341, 343 EU 17–18, 407–8, 419–21, 430–38, 440–42, EU 429, 443–5, 463 444–5, 447, 462, 465–7 gender and 193, 200–202, 207 state of mind and 10, 52–66 government trading 184, 186–7, 189 UK 17, 407–28 political intelligence 15, 157, 160, 161, 163 Market Abuse Directive 419–21, 430–38, UK 417 440–42, 444–5, 447, 462, 465–7 USA 7, 13, 15, 25, 28, 52, 57, 60, 65, 83–9, market information 8, 14 109, 139–41, 144, 148, 214, 230–31 market intelligence (UK) 412 Mises, Ludwig von 260, 261 market liquidity 257–8, 260 mismanagement 30, 136, 138, 142, 144, 145–6, transaction costs and 254, 270–72 257 market professionals 274–5, 413 misrepresentations 88–90, 324, 325–6 enforcement 29, 232–5, 238, 242–4, 247–50 mixed bag behavior 30, 130–35, 149 information traders 269–70 Molecular Devices Corporation 203 Marovitz, William 202 monetary policy 180, 413 marriage 12–13, 193–4, 200, 202–4 money laundering 419, 428 Marshall, Cassandra 58 Monterrico Metals 424 Marshall, Judge Thurgood 42, 50 Moore, Judge Leonard 38–42, 43–4, 47 Martin Marrieta Inc. v. Vulcan Moran, Congressman Jim 181 Materials Company 462 Morgan (J.P.) 247, 425 Martynova, Marina 455–6 Morgan Stanley 119, 203, 249 Mason P 374, 375 mosaic theory 115, 218 material effect 371–2, 377–8 motivation 10, 53, 55, 57, 62 material information 8, 56, 60, 62, 356, 398, self-interest 178–82, 184, 189, 252 417–18, 445 Motorola, Inc. 119 material, nonpublic information 13–14, 28, Muller, Karl 246 53–4, 230 Mullins, David 220 disclose or abstain rule 3–5, 88, 96, 106, multi-factor test 438–9, 447 109, 137, 161, 164, 213, 233 multilateral trading facilities 441 pillow talk 191, 193, 200–204 Murdoch, Donna 191 stock trading 130–32, 136–42, 145 Murphy, Kevin J. 74 tipping see tipping mutual funds 238, 269–70 Maug, Ernst G. 221 “My Nookie” website 203 Mauro, Paolo 283, 286 MDS, Inc. 203 Nagy, Donna M. 86, 87 Meckler, Alan 128 “naming and shaming” 443 Medicare 181 179, 264, 383 Mendelson, Haim 271 Nasser, Tareque 467 Mengozzi, General Advocate 446 National Bureau of Corruption mergers and acquisitions 26–7 Prevention (China) 306 China 320, 326, 336, 338–9 National Companies and Securities EU 452–3, 455–6 Commission (NCSC) 366 UK 409, 427 National Party (NZ) 395 USA 58, 87–8, 92–3, 115, 247 National People’s Congress 315 “merit statute” 102 negligence 310–11 merits, decisions based on 177–9 neimu xinxi 335 Merrill Lynch 63, 249 New Deal 33, 34, 36, 41, 51 Meulbroek, Lisa 221, 264 New South Wales Criminal Court of Milken, Michael 256 Appeal 368, 371 Ministry of Public Security (China) 306 33, 114, 264, 458 Ministry of Supervision (China) 306 New York Times, The 202 Minton, Bernadette A. 241 New Zealand 16–17, 384, 386–404 misappropriation theory current regulation 395–402

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 478478 227/03/20137/03/2013 12:2112:21 Index 479

enforcement deficit 402–4 patents 91–2 historical overview 387–94 Paul, Ron 179–80 Stock Exchange 386, 391, 397 pay see salary Newton-Raphson search procedure 223 payoff devices 14, 167, 168 nominal outsiders 308 penalties Nomura Securities 354 administrative 311–12, 325, 341, 344 non-fiduciary thieves 88–9 Australia 382–3, 385 non-pecuniary gain 6 China 311–12, 320–21, 325, 341, 344 nondisclosure 46–7, 88, 109, 366, 459 Japan 353–4, 358 nonpublic information 9, 35, 60, 89–90, 339, NZ 391, 392, 400 357 UK 419, 424–5, 427 inside information 8, 14, 309–10 USA 65, 101, 110, 215 market information 8, 14 see also fines; prison; sanctions material see material, nonpublic information pension funds 269–70 political intelligence 15, 153–65 Percival v. Wright 409 nontraditional insiders 432, 443, 445, 448 “permanent insiders” 108 nontraditional relationships 12–13 personal benefit test 65, 311 nuclei accumbens 62 personal gain 184 pillow talk cases 191, 193, 200–204 objective knowledge test 311 Pinkerton, John M. 220, 221 off-market transactions 415 Playboy Enterprises, Inc. 202 offenses Plunkitt, George Washington 176–7 dealing (UK) 413–19 poison pills 247, 461 market abuse (UK) 419–22 policy trading (NZ) 398 debate (USA) 19–30 Office Depot, Inc. 122–3 implications (takeover bids) 468 officers monetary 180, 413 definitions 378–9, 432 reasons (EU differences) 443–8 trading by 18, 307, 314, 319, 449, 463–4 political economy of insider trading laws/ O’Hagan case 8, 10, 25, 57, 59, 84–6, 88, 90, enforcement 19, 266–98 108–9, 157, 162, 189–90, 214, 314, 331, data and results 281–97 333, 342, 344 duration analysis 279–81 Olivier, Jacques P. 264 integrated model 268–73 open-market purchases/sales 236 testable hypotheses 274–9 opportunistic trades 466–7 political intelligence opt-out approach 148 industry 15, 153–65 option prices 224, 227–9 professionals (trading by) 161–3 optional disclosure-based regime political openness 282, 285 decision-theoretic analysis 136–42 political theory of finance 277–9 mixed bag practice 30, 131–5, 149 Pomorski, Lukasz 467 proposed approach 142–9 “possession versus use” debate options to purchase 102 Australia 369 O’Reilly DCJ 374 China 311–13 organized trading facilities 441 EU 433, 436, 443, 447, 463 outsider trading 144, 148 USA 54–6, 60, 62, 313 outsiders, sharing information 456–8 post-fiduciary duty era 15–16, 80–98 over-inclusiveness 445–7 equal access 81–3, 86–90 over-the-counter market 415, 441 property rights 90–97 overconfidence hypothesis 198 SEC and 80–90, 97–8 ownership concentration 254 potential defendants 10–15 Poulsen, A. 220–21 “painting the tape” 435 Powell, Justice Lewis 9–11, 48–51, 80, 81–4, 86, Pan Haishen case 310, 325 89–91, 352, 361 Pandick Press 5 Practical Law Company 110 Partnoy, Frank 236 Prada Report 402

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 479479 227/03/20137/03/2013 12:2112:21 480 Research handbook on insider trading

“precise nature” test 450–53 Proctor and Gamble 217, 218 precision (of information) 439, 446–7 procurement 379 102 professional intermediaries 412–13 preliminary information 436–40 professional securities traders 29 prescribed markets (UK) 420–21 professionals see market professionals press releases 374–7 profits 185–6, 206, 252, 261 Presstek, Inc. 122 compensation and 22, 75 price decoding 143–4 demand for regulation 232, 239–40 price discovery function 163 disclosure-based approach 141–2, 144, 146 price effects 24 disgorgement 215, 230, 321, 330, 358 significant 437, 453–4, 468 Japan 350–51, 352, 358 price mechanism 261 swing 35, 37, 305, 330, 347 “price sensitivity” test 453–4 prohibited conduct 379 price system 19, 21, 253, 261–4, 265 prohibitions 27–9, 396–8, 433 price-affected securities 411–13, 415 Project 132 price-sensitive information 365, 375–6, 378, property rights 259, 261, 268, 272 415, 418, 420, 449, 451, 453 contractarian approach 30, 137, 140–43 price-sensitive period 335, 338–41 information 90–97, 133–4, 145–6, 353 prices post-fiduciary duty era 15–16, 80–98 bid-ask 28–9, 125, 134–5 prophylactic approach 162–3, 181, 186, 248, compensation and 22, 77, 79 353 market 254 prosecutions 242–4, 247, 320 option 224, 227–9 Provenco 394 stock see stock prices proxy-rule changes 247 PricewaterhouseCoopers 116–17 Prudential Regulatory Authority 425, 426 primary insiders 312, 409, 412, 415–16, 418, psychological bias 61–4 422, 444–5, 457, 463 psychology (scienter requirement) 10, 52–66 “prime directive” 102, 103 public choice theory 27–9, 230–50 prison 358 public corruption Australia 382, 385 governmental trading as 14–15, 171–6 China 321–2 harms/costs 176–83, 184 EU 443 public disclosure 75, 95 Japan 358 mandatory 18, 449, 458–60, 466 USA 211, 212, 228, 231 public enforcement (China) 17, 322–5 private capital markets 99 public good 173, 428 private constituencies 268–70 public interest 251 private corruption 168, 183–9 enforcement 29, 230, 234, 246, 249 private enforcement 91 political economy 267, 272–3, 276 China 304, 322, 323–6, 328–9 public issuer (NZ) 390–92, 394, 397 private gain (from public corruption) 175–6, Public Utility Holding Company Act 180–81, 183, 184 (PUHCA) 33–4 private interest 29 publishable information test 374–6 changing demand for regulation 230–42, Punch Taverns, Inc. 454 246, 248–50 punishment see penalties; sanctions political economy and 267, 272–3, 276, 297 put options 132 private investment in public equity (PIPE) 87, 239 qualifying investments 420–21, 422–3 private placement 103 quasi-insiders 28 private rights of action 161 Private Securities Litigation Reform Rae Report 365, 366 Act (PSLRA) 94 Rahman, Monie 191 private-interest model 232–42 Rajaratnam, Raj 101, 203, 211–12, 217, 231, privatization 413 251, 264, 449 probability/magnitude approach 438–9, 443, Ralph, Richard 423–4 447 rat-cellars 328

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 480480 227/03/20137/03/2013 12:2112:21 Index 481

rat-trading 315 right-leaning governments 19, 259, 267, 278–9, rational choice approach 57–8, 59 283, 290–98 readily observable test 372–4 risk 62 “reasonable expectations” 438–9, 446 -aversion 96, 198, 206 “reasonable investor” 439–40, 443, 445–6, 447, detection 57–60, 64–5 453–4 entrepreneurship 22, 67, 72–3 rebuttable presumptions 163, 313, 436, 462, identical market 80, 81 463, 468 political economy and 280–81, 291, 293, 296 recklessness 65–6, 311, 336 post-fiduciary duty 92–3, 96 regional FTA (Australia/NZ) 387, 395, 400 of prosecution 243–5 registered exchange 397 rational choice 57–8 Registrar of Companies (NZ) 402 Rivkin 371 registration and qualification process 102–4 robustness checks 296–7 regulated markets (EU) 441–2 Roche Committee 394 regulation Rocklage, Patricia 191 case for 23–7 Roe, Mark J. 258–9, 277–8, 290 changing demand for 29, 230–50 romantic partners 191, 193, 200–204 China 17, 303–26 Roosevelt administration 42 disclosure-based regime 30, 130–49 Rosenfeld, David 124 enforcement regime (China) 17, 327–46 routine trades 466 insider dealing and market manipulation 21, rule changes 244–50 441–3 rulemaking 39–41, 102, 162–3, 387 Japan 18, 347–61 rumors 220–21, 222–3, 227 market misconduct (UK) 17, 407–28 Russell Committee 394 NZ 16–17, 386–404 Ryan v. Triguboff case 370 political economy and 19, 266–98 post-fiduciary duty era 15–16, 80–98 S&P 500 179 private interest model 232–42 SAC Capital 212 public choice theory 27–9 safe harbors 28, 102, 103, 105–6, 398–400, rule changes 244–50 462 state of mind and 10, 52–66 salary theories of 231–50 bonuses and 22, 68, 71–2, 95, 96 Regulation Fair Disclosure (Regulation FD) CEO pay 235–6, 241–2, 249 6–7, 112–29, 457 perks 74 early enforcement actions 117–23 sanctions 244 effects of 125–6 China 320–21, 341–2 initial experience under 115–17 damages 215, 341–2 SEC’s adoption 112–15, 129 EU 440–41, 442–3 Siebel Systems 119–24, 129 severity of 211, 212 technological developments and 126–8 see also fines; penalties; prison regulatory officials 308 Sanders, James and Miranda 424 Rehnquist, Chief Justice 90 Santa Fe Industries, Inc. v. Green 9–10, 83 religious affiliations 283, 286, 290–92, 294–5 Sarbanes-Oxley Act 89–90, 100, 205 Renneboog, Luc 455–6 Schaeffler 465 rents 266, 268, 273, 410 Schering-Plough 118 reporting trades (EU) 464–7 Schreiber v. Burlington Northern, Inc. 88 reputation 27, 111, 311 Schrempp, Jürgen 436, 437, 439 Reserve Bank of NZ 400 Schumpeter, Joseph A. 69–70, 72, 78 resource allocation 253–4, 260–65 Schwarzmann, Harry P. 37 “restricted securities” 105 scienter requirement 10, 52–66, 311 restricted stock units (RSUs) 110 SEAQ International Trading System 421 restrictive approach 136–42, 143 search warrants 217 reverse-merge 338, 339, 342–3 SEC v. Capital Gains Research Bureau 3–4, reward 22, 62, 68–70, 72–3, 96, 141, 253, 270 33–51 Ribstein, Larry 154, 158, 164, 167 background 33–7

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 481481 227/03/20137/03/2013 12:2112:21 482 Research handbook on insider trading

enforcement action 37–45 Securities Exchange Surveillance influence/impact ( term) 47–50 Commission 358, 359–60 Supreme Court 45–7 Securities Industry Act (1970) 365 SEC v. Christopher A. Black 122 Securities Industry Act (1980) 366 SEC v. Cuban 87 Securities Law (China) SEC v. Dorozhko 88, 89 (1999) 329–30, 334–6, 341 SEC v. Lund 11 (2006) 17, 304–5, 307–10, 314–18, 330–46 SEC v. Presstek 122 securities lawyers 100–101, 107 SEC v. Switzer 194 securities markets SEC v. Texas Gulf Sulphur see Texas Australia 365–6, 373, 383–6 Gulf Sulphur case China 17, 303–26, 329, 334 SEC v. Zandford 88–9 investor confidence 189, 190 secondary insiders 412, 416, 422, 432, 444–5, NZ 386–7, 390–400, 403 457 secondary 103–6 secondary markets 28–9, 35 sex and gender in 197–9 for securities 103–6 UK 17, 407–28 startup companies 15, 99–111 Securities Markets Act (1988) 386–7, 390–400, SecondMarket 99, 101, 104, 106 403 Secrist, Raymond 132, 140 Securities Markets Amendment Act Securitibank 387 (2002) 394–6 Securities Act (1933) 1, 28, 41, 44, 46, 49–50, Securities Regulations 2009 (NZ) 386 217 Segré Report 429 Securities Act (1978) 386–7, 390, 400, 402 selective disclosure 6, 113, 122–9 Securities Amendment Act (1988) 390 self-dealing duty 97, 113, 269 Securities and Exchange Commission (SEC) self-interest 178–82, 184, 189, 252 74, 78, 387, 463 self-regulation 275, 410 background 33–7 seller-underwriter 105 Capital Gains 3–4, 33–51 sellers 105–6 changing demand for regulation 230–34, Senators (stock trading by) 13–14 237–9, 242–50 Senetek 118 China and 322, 324 Serious Fraud Office (NZ) 402 decision theory and 145, 147 Serious Fraud Office (UK) 418 EU and 429, 433 Serious Organized Crime Agency 418 fiduciary duty and 52, 80–90, 97–8 sex see gender gender and 191, 193–6, 201–3, 207 Seyhun, H. Nejat 263–4 governmental insiders 155, 157, 159, 161–2, Shanghai Stock Exchange 306, 318–19, 327, 164 328–9, 330 Japan and 347, 351–4 shareholders policy (overview) 1–11, 18, 20, 25, 27–9 China 308, 314 public choice theory 27–9 EU 432, 458, 459 Regulation FD 6–7, 112–29 expropriation 19, 257–9, 265 scienter requirement 52, 54–5, 57–8, 60–61, injury to reputation 27 64–5 Japan 350, 351, 355 secondary markets and 100–103, 105, NZ 393–4 107–10 UK 409, 410 takeovers and 211, 213–18, 228 USA 10–11, 12, 23–4 Securities Commission (NZ) 391–2, 394, 396, shares 73, 454–6 401–4 SharesPost 99, 101, 104, 106 Securities Data Corporation 224 shelf registration rule 28 Securities Exchange Act (1934) 1–2, 9, 53, 81, Shenshen Fang case 320, 321 114, 305, 330, 432 Shenzhen Stock Exchange 306, 318, 327, 329, Capital Gains case 35, 46–7 330 political intelligence 153, 155, 162–4 Shinn, James J. 277 post-fiduciary duty 81, 94 Shleifer, Andrei 272, 303 secondary markets 107, 110 short-swing profits 35, 37, 305, 330, 347

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 482482 227/03/20137/03/2013 12:2112:21 Index 483

short- 305, 330, 467 turnover 282, 285, 291, 296 Sides, Judge 374 UK 410 Siebel Systems 112, 118–24, 126, 129 USA 98, 133, 135, 254–60, 264–5 Siegel, Martin 256 stock options 71–6, 105, 110, 235–6 Silicon Valley 99, 101 stock ownership 257, 258, 260 Sinha, Praveen 125 stock prices 119, 187, 236, 253, 262 small investors 269–70 behaviour (USA) 18–19, 212–13, 219–29, SMARTS surveillance system 383, 402 466 Smith, Adam 252, 253 decision theory 131–3, 135, 138, 143–4, 146 Smith, Judge John 42 political economy and 266, 270–71 social costs 267, 270–72, 275 post-fiduciary duty 85, 87, 93, 95 social harms/benefits 30, 130 stock trading 130–32, 136–43, 145 social legitimacy 59, 60 Stockholm Stock Exchange 198 social media 7, 128, 129 Stone, Oliver 251 see also Facebook Stop Trading on Congressional Knowledge social welfare 138, 141, 149, 249, 273 Act (STOCK) 15, 153–65 Song Yixin 325 insider trading theories 156–8 “special circumstances” test 108 political intelligence and 161–4 Spector case 435–6, 462, 463 provisions 154–5 spousal relationship 12, 13, 193–4, 200, 202–4 Strong v. Repide 108 stake building 460–61 subjective knowledge test 311 Stark, Andrew 175 substantive law 17, 213–14 startup companies 15, 99–111 Sumitomo Mitsui Financial Group 420–21 State Council Securities Commission sunk costs 91–2 (China) 329, 334 supererogatory financial gain 175, 176 state of mind 10, 49, 52–66 Supreme Court 5, 6, 8 Statman, Meir 59, 63 Capital Gains 4, 45–7 Steadfast Capital 132 SEC relationship with 33–7 Steel Partners 353 Supreme Court of NSW 370, 374 Stevens, Justice 50 Supreme People’s Court (China) 305, 324, 325, Stewart, Justice 171 330, 341 Stewart case (Martha Stewart) 53, 62–4, 65, Supreme People’s Procuratorate (China) 305, 191, 194–6, 231 330, 341, 343–4 stock exchanges survival analysis 279–81, 291–6 Australia 365, 373, 383–4 Switzer 194 China 306, 318–19, 327–30 establishment 284, 287–9 takeover bids (Europe) 18, 449–68 EU 434 disclosure of information 456–60 London 410 inside information 450–56 NZ 386, 391, 397 policy implications 468 self-regulation 275, 410 reporting of trades 464–7 Stockholm 198 trading 460–64 Tokyo 349, 421 takeovers 320 stock market 266, 269, 274–9, 297–8 evidence from 18–19, 211–29 Australia 365, 373, 383–4 Tang Jian case 315 capitalization relative to GDP 282, 284, 285, targets 291–5, 296 hedge funds 248–50 China 304, 306, 318–19, 327–30 of prosecutions 242–4 comparative experiences 284, 287–9 trading by 18, 449–50, 458, 460–63 crashes 264–5, 390–91, 395 Taylor, Fred M. 260 efficiency 135, 271–2 Taylor, Lucian 241 EU 434, 449 “technical elements” 89 insider trading laws and 254–60 technological developments 126–8 Japan 18, 349, 354, 360–61, 421 temporary insiders see constructive insiders NZ 386, 391, 397 temptation costs 177–81, 185–6

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 483483 227/03/20137/03/2013 12:2112:21 484 Research handbook on insider trading

territoriality 396, 421 Truman administration 34 terrorist financing 419 trust, duty of 348, 463 Texas Gulf Sulphur 10–11, 20, 47–8, 145, 352, gender and 193–4, 196, 200, 203–7 444, 450 USA 13, 39, 48, 52, 86–7, 90, 139, 157–60, enforcement actions 337, 342, 344 163, 174, 181 equal access 4–5, 23, 80–82, 85, 98, 314, Twin Peaks regulatory model 425 332 Twitter 128 officials 131, 133–4, 137–9 Tyler, Tom 182–3, 187 Thomas, Joseph 35, 37 Type I errors 130 Thomas, Randall 236 Type II errors 130 Thompson, Dennis 173, 181 Thomsen, Linda C. 237, 245 UK (insider dealing and market abuse) 17, Thorburn, Karin S. 461 407–28 Tianshan Fangzhi case 321 EU Directive 422–4 Tide Water 35 evolution of offense 409–19 tippees 6, 12 Authority 425 EU 445 market abuse offense 419–22 extension of classical theory 157–9 post-crisis FSA enforcement 424–7 Japan 356 “ultimatum games” 189 liability (China) 336, 343 unauthorized disclosures 417–18, 424–5 liability (USA) 148–9 unauthorized trading 146 tipper–tippee liability 108–9, 159, 161–2, 164 uncertainty 62, 65–6, 69, 162 tippers 6, 12 EU 18, 449, 451–2, 453, 458, 468 liability (China) 333–4, 336, 343 under-inclusiveness 445–7 state of mind 10, 52–66 underwriters (Australia) 380 tipping unfair discrimination 36 China 311, 333–4, 336, 343 United Housing Foundation, Inc. v. EU 18, 433, 449, 457 Forman 48 NZ 391 US v. Carpenter 24–5, 84, 85, 96 origins of US prohibition 3, 6–7 US v. Chestman 12–13, 86, 87, 193, 202 pillow talk 191, 193, 200–204 US v. Evans 162 prohibited conduct (Australia) 379 US v. Mahaffy 89–90 toehold investments 460–62, 464–5 US v. O’Hagan 8, 10, 25, 57, 59, 84–6, 88, 90, takeovers and 18–19, 213, 222, 224–6, 98, 108–9, 157, 162, 189, 214, 314, 331, 228 333, 342, 344 Tokyo High Court 354 USA 244, 348–52 349, 421 corporate law 348–50 “total-mix” test 439–40, 443, 445, 447 Criminal Code 89 Tourani-Rad, Alireza 403, 404 gender and insider trading 15, 191–207 “trade decoding” 30, 143–4 increasing insider trading (evidence from trade secrets 91, 92 takeovers) 18–19, 211–29 trademarks 91, 92 modern prohibition (key elements) 8–16 trader (state of mind) 10, 52–66 prohibition (origins) 1–8 trading scienter requirement 10, 52–66 by bidder see bidder SEC see Securities and Exchange by classical insiders 18, 463–4 Commission (SEC) offenses (NZ) 398–400 use prohibited conduct 379 possession versus see “possession versus reporting trades (EU) 464–7 use” debate by target 18, 449–50, 458, 460–63 propensity hypothesis 198 unauthorized 146 “using” inside information 435–6 transaction costs 254, 270–72 transparency 421, 444, 464, 465 victimless crime 443–4 Tranz Rail 394, 396 Virginia Bankshares, Inc. 121 Triage Committee (ASIC) 384 Vishny, Robert 272, 303

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 484484 227/03/20137/03/2013 12:2112:21 Index 485

Wagner, Robert E. 262–3 wiretaps 217, 218 Waksal, Sam 63, 64 Wisniewski, Piotr 403–4 Wall Street (film) 251 women Wall Street Journal 130, 132, 251 role of gender in US insider trading law 15, “Heard on the Street” 24–5, 86, 96 191–207 Warren, Chief Justice 45 see also family; feminism; marriage Waterman, Judge Sterry 38, 40–44, 47 World Development Indicators 282, 285 WebMediaBrands 128 Wurgler, Jeffrey 270–71 websites, issuer 126–7 Webster, Daniel 172 Xi Xiaoming 324 Wei Jiang 236 xuanzhu yingxiang 334, 339 Whaley, Robert E. 223 Wharton Research Database System 224 Yazawa, Makoto 352 whistleblowing 262–3, 418, 441 Yelp 99 White, Justice Byron 45–6 Young, Justice 370–71 “white knight” 458 Whitney, Richard 33 Zandford case 88–9 Wikileaks 247 Zhejiang Hangxiao Steel Structure Co. Williams, Justice 396 Ltd. 327–8 Williams Act 81 Zhongda 334, 335 Wilson Neill 387, 392–3 zhongyao 334–5 Winans, R. Foster 24–5, 85, 96 Ziobrowski, Alan 14, 169, 170 winners, potential 268–9 Zynga 99

Stephen M. Bainbridge - 9780857931856 Downloaded from Elgar Online at 09/30/2021 01:21:50PM via free access

MM31153115 - BAINBRIDGEBAINBRIDGE 97808579318499780857931849 PRINT.inddPRINT.indd 485485 227/03/20137/03/2013 12:2112:21