William & Mary Business Law Review


Bruce W. Klaw


This Article makes the case for a new U.S. statutory provision that defines and prohibits insider trading under an “equality of access” theory. It supports this claim, and contributes to the important public dialogue concerning this prevalent practice, by highlighting the moral and legal gaps in existing U.S. law that result from understanding the harms of trading on the basis of material nonpublic information solely with reference to fiduciary breach or misappropriation, as evidenced by the recent cases of United States v. Newman and United States v. Salman. It weaves legal analysis together with current literature in business ethics, moral philosophy, finance, and accounting to consolidate and offer new arguments in the long-standing debate over insider trading based on Rawlsian social contract theory, applied deontology, and empirically informed utilitarianism. It then draws on lessons learned from empirical analysis of European states’ adoption of the equality of access theory under the Market Abuse Directive. Finally, it analyzes three insider trading bills currently pending in Congress and makes the case for a statute, like S. 702, that will prohibit the use, by anyone, of material information concerning a financial instrument that is not, at least in principle, available to others through independent and otherwise lawful due diligence.