The Carrington Years of Duke Law School

VOLUME 6 Contents 2 Editor's Column / letters 3 Forum 4 The Criminalization of Insider Trading/james D. Cox 9 College Sports Reform: Where are the Faculty?/ john C. Weistart 16 Conference Report: The Emerging Framework of Civil Law in China 18 About the School 19 Deanship Transition 23 Concentrating on Legal Ethics 24 For the Children S Sake: Duke law Students Represent the Abused and Neglected 29 Innovative Clinical Programs at Duke DEAN EDITOR ASSOCIATE EDITOR Paul D. Carrington Evelyn M. Pursley Joyce Bumann NUMBER 2 33 The Docket 34 Participating in Changes in the Chinese Legal System 39 Changing Deanships 42 Alumnus Profile: James M. Poyner '40 44 Specially Noted 51 Alumni Activities 58 Upcoming Events Duke Law Magazine is published under the auspices of the Office of the Dean, Duke University School of Law, Durham, North Carolina 27706 © Duke UniverSity 1988 STUDENT REPORTERS BUSINESS MANAGER PRODUCTION Mark DiOrio Mary Jane Flowers Graphic Arts Services Robert Nagy Greg Orner DUKE LAW MAGAZINE / 2 Editor's Column This issue announces a major In addition to the news of our alumnus prof.tle for this issue fea transition at Duke Law School. Paul dean change, the About the School tures Jim Poyner '40 who has spent D. Carrington, who has served as section includes articles on the legal a lifetime making important contri dean here for ten years will be re ethics course that is now part of butions to the Triangle area and to turning to teaching, and Pamela B. the first year curriculum and the North Carolina generally. Our Spe Gann, a member of the Law School clinical curriculum at the Law School. cially Noted feature highlights tran faculty since 1975, will be assuming Also included is an article about sitions of a number of Duke Law the deanship effective July 1, 1988. Duke Law students who are partici alumni and faculty members. Both deans are featured on our pating in the Guardian Ad Litem In the Alumni Activities section, cover, and some thoughts on the program in Durham County either we continue to share news of your transition are included in the About as volunteer guardians or through personal and professional milestones the School section. the Child Advocacy Clinical program with the Duke Law family. We are In two timely articles in the established and supervised by Kate always pleased to hear from you Forum, Jim Cox shares his views Bartlett. and hope that you will continue on the criminalization of insider The Docket continues to grow to notify us with news of yourself trading, and John Weistart consid as we receive more information re or your classmates. We also encour ers the (non-?) role of the faculty in garding our alumni. In this issue age all of our readers to communi college sports. The Law School we report on our expanding network cate with us so that we can respond hosted a conference on civil law in with China. The China Program is to your interests in the Magazine. China this fall, a report of which is an important part of the Law School's also included. growing international program. Our Letters Duke Law journal Dear Mr. Lofton: high standing. Evidently, therefore, I am a graduate of Duke Law ~ appreCiate your interest in the Journal established in 1951 was School-Sept. 1942. Yes, that fall the history of the Law School and a revamping of this earlier publi date is correct. We were under a its publicatiOns. One benefit we are cation along the lines of law reviews speedup program arranged so that deriving from publishing articles at other schools. we could graduate before we were on programs at the School is in Again, we appreCiate hearing drafted for service in World War II. creased knowledge of our own from you. ~ hope that you continue I am writing about an item in history. to enjoy the Duke Law Magazine. the latest issue of Duke Law Maga }bu are correct that there was Please let us know if we can ever zine. It is the article on page 34 a publication of very similar name provide you with further informatiOn. entitled "Duke Law journal." The at the Law School when you were article implies-but does not say here in the early '405. According directly-that a publication called to the article, "Duke Law School Let us know if something the Duke Bar journal had its in the 19305: A Retrospective," pub piques your interest. Send letters to beginning in 1951. lished in the Winter 1987 issue of the editor to: If my recollection is correct, we the Duke Law Magazine, the Duke had a Duke Bar journal when I was Bar Association Journal was estab Editor, Duke Law Magazine in school. I had a copy of it in my lished at the Law School in 1933. Duke Law School f.tles for years, but I must have fi This publication was modeled after Durham, NC 27706 nally discarded it. Therefore, I can't the journals Of state bar associa prove my point. tions and carried as one section I would appreciate it, however, the proceedings of the Duke Bar if you could check it out and let Association. A second section pub me know. I thOUght you might be lished comments on current court interested in this bit of Duke Law decisions of consequence prepared history. in the Current Decision course by John Lofton second and third year students of DUKE LAW MAGAZINE I 4 The Criminalization of Insider Trading James D Cox* nsider trading of one measure or another has Indeed, even a few experienced securi most certainly been a part of society as long as markets have existed. Its proscription caught ties lawyers opine that insider trading I the eye of the corporate-securities bar in the is a victimless offense. mid 1960s with the exciting facts involved in the Sec ond Circuit's landmark decision, SEC v. Texas Gulf Sulphur Co. J 1 wherein insiders were required to dis close material nonpublic information or abstain from trading. And, in the last few years a new regulatory dimension has been added to insider trading with intensified enforcement of insider trading within the criminal system. The anomaly throughout these de velopments has been the lack of agreement among courts and commentators over who is harmed by in sider trading. Indeed, even a few experienced securi ties lawyers opine that insider trading is a victimless offense. If insider trading were to remain purely an SEC civil enforcement matter, answering this question would be less urgent, because so much of the regu lation under the federal securities laws is not designed to protect investors from any overt harm, but rather to assure the smooth and fair operation of securities markets. However, the current frequency and intensity of the government's enforcement of insider trading through the criminal justice system not only invites critical reconsideration of the reasons insider trading is prohibited, but also requires a separate justification for using the criminal justice system to serve that cause. The following are some tentative views on these ques tions that I recently shared with our alumni during Barristers Weekend. Not surprisingly for those who know me, I come out on the pro regulation side of these questions and believe that criminalization of insider trading is consistent with both historical and emerging functions of the criminal justice system. *Professor of Law, Duke University. Professor Cox Insider Trading Orthodoxy joined the Duke Law School faculty in 1979 and First attempts to justify insider trading's proscrip teaches primarily in the corporate and securities tion focused on how it was believed to harm investors. area. He recently testified on the Insider Trading Insider trading was characterized as unfair, as surely Proscriptions Act of 1987 before the Securities Sub it is, because the insider by virtue of his position or committee of the Us. Senate Committee on Banking stealth has an unerodible advantage in the information Housing and Urban Affairs. Tbis article is derived he possesses. But how does this unfairness harm the from a presentation to those attending the Duke Law insider's opposite trader? The insider's trading can School Barristers Weekend in March 1988. easily be seen as a fortuity. The individual investor's VOL. 6, NO. 2 / 5 decision to sell or to purchase is unaffected by whether ... much of the regulation under the the insider is also secretly trading in that same market. If the insider neither purchased nor sold, the indi federal securities laws is not designed vidual investor would nevertheless have pursued his to protect investors from any overt trading strategy To be sure, sellers are disadvantaged by the nondisclosure of good news as are buyers by harm, but rather to assure the smooth the nondisclosure of bad news. But such conclusions and fair operation of securities fail to implicate why the insider's trading contempo raneous with their possession of such information markets. should impose upon them a duty to disclose. Modest support for the disclose or abstain rule can be found if the trading and nondisclosure aspects intertemporal swings in the firm's value; they thereby of insider trading are disaggregated. Certainly the in can reap the gains of their privileged positions by an sider's trading does impact the supply and demand ticipating the direction of stock price movements. for the security traded in, so that the insider may pre It is the rare inside trading case where such abusive empt a price that was a lower "buy" price or a higher practices have been found to exist and serve the in "sale" price than what would have been available to sider's trading agenda.

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