Category: Volume 46

This Article explores the rationale behind corporate criminal liability for insider trading and whether the current regime of U.S. insider trading law holds the correct victim accountable. The Author begins by tracing the development of corporate criminal liability generally, and then examines corporate liability for insider trading under the current regime. Under this current regime, the Author addresses various shortcomings, such as the breadth of prosecutorial discretion in indicting corporations for its employees’ actions, and the harm incurred by innocent shareholders through punishing corporations.

The Author argues that the current regime for U.S. insider trading law is absurdly overbroad and wrongly punishes the victim for the crime. Recognizing the need for reform, the Author proposes statutory constraints on the overbroad prosecutorial discretion allowed for indicting corporations for insider trading. The Author argues that the proposed reforms would not affect individual liability for insider trading, but would properly limit corporate liability for insider trading in appropriate circumstances. The Author reasons that properly limiting corporate liability for insider trading furthers the ultimate goal of holding the correct party liable—the employees who commit the crime.

It is commonly believed that slavery ceased to be an issue directly concerning the United States with the passage of the Thirteenth Amendment in 1865. However, the reality is that slavery is still a real, timely issue for U.S. courts and citizens due to its facilitation by U.S. corporations and their business activities abroad. This Article traces the history of corporate liability for human enslavement from its pre‐ World‐War‐II‐roots, through the prosecution of companies that exploited war prisoners and concentration camp inmates for profit in Nazi Germany, to today’s application in industries such as chocolate‐making.

The Author argues that in spite of certain roadblocks established by the U.S. Supreme Court for victims seeking redress, modern‐day corporate human rights violations—such as large U.S. candy‐makers’ use of cocoa supplied by child slaves on African farms—should be allowed to be prosecuted in U.S. courts. Further, the Author argues that corporate human rights violations should be confronted with the same level of moral conviction and zeal exhibited following the egregious crimes of World War II. In addition, this Article analyzes limited signs of hope for today’s victims of slavery, including civil litigation strategies being employed by human rights lawyers representing former slaves, and modest legal reforms that have been enacted and proposed to address the use of slave labor in corporate supply chains.

In United States v. Newman, the United States Court of Appeals for the Second Circuit imposed a new and narrowed standard for establishing a remote tippee’s knowledge and a corporate insider’s personal benefit for purposes of insider trading under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5. This Casenote analyzes the Newman decision and contemplates its potential impact on tippee liability in insider trading cases. The Author begins by explaining the history of tippee liability prior to Newman and discussing the Second Circuit’s justifications for gradually narrowing the knowledge standard and deviating from insider trading precedent. The Author then examines the Newman decision, observing that the court held a tippee must actually know of the insider’s breach of a fiduciary duty to be liable for insider trading, which is in contrast with prior caselaw that imposed liability on tippees who should have known of the insider’s breach of a fiduciary duty. Further, the Author notes that the Second Circuit blurred the definition of what suffices as a “personal benefit” to the insider and imposed an ambiguous “meaningfully close” standard that was not grounded in precedent.

The Author argues that the knowledge and personal benefit standards for tippee liability established inNewman significantly hinder the government’s ability to prosecute tippees. This effect undermines public policy and threatens the public’s confidence in markets and investment activities. To promote more effective securities laws, the Author proposes recommendations for a less cumbersome analysis of tippee liability by examining comparable federal antifraud measures, international law, and existing theories of insider trading. The Author concludes by suggesting that the scrutiny of tippee liability cases should focus on whether information was obtained to gain an unfair advantage, and predicting that this focus will simplify the analysis, add predictability to securities laws, and help stabilize markets for investors and the public.