At the recent American Bar Association gathering, the SEC’s and the Department of Justice’s recent activities regarding insider trading were heavily discussed.
During this conference, defense attorneys on the panel suggested that both regulators were pushing insider trading law to its limits. Many believed at the conference that the SEC should now consider defining insider trading.
As many know, the SEC has, for many years, refused to define insider trading, feeling that such a definition would engender ways to avoid enforcement. However, commentators at this conference seem to suggest the time had come given the SEC and DOJ’s increased use of a variety of insider trading theories as well as its impact on hedge funds and raising capital. For example, with the recent Galleon case and SEC v. Dorozkho, a computer hacking and insider trading case, many believe that these cases are expanding the bounds of insider trading, and is only the beginning of the SEC’s and DOJ’s continued exploitation in this particular area.
In sum, the SEC and DOJ have made it clear that they will continue to effect these enforcement actions both on the civil and criminal side, and that the industry needs to consider alternatives other than a legislatively defined insider trading approach.