Securities Fraud and Insider Trading

Paper Summary:

This paper briefly examines the history of insider trading from a criminal standpoint, but focuses mainly on contemporary issues in terms of existing legal codes, as well as codes put forth by the SEC, and the way these rules and regulations have changed in the past few years. The contemporary nature of the report is also heightened by the current mass-media fixation on the issue of insider trading, which is also explored through examples, including that of Eri I. Tsao, Martha Stewart, and other case histories that center around criminal justice's handling of insider trading cases. Changes in the system are discussed mainly as they are related to the SEC and criminal law.

From the Paper:

"In the case of Tsao, a leading research scientist at Medlmmune, the criminal activity which took place involved using insider information to buy and sell stock for a profit. "The SEC said Eric I. Tsao, a vice president at the Gaithersburg company, bought stock in three biotechnology companies soon after learning Medlmmune was close to completing business deals with each of them" (Barbaro, E1). Using this information, which had not been released to the public, to his own advantage, caused Tsao to be indicted on charges of insider trading. The biotechnology companies were supposed to have business deals with Medlmmune, which caused their stocks to go up after the deals were completed, earning Tsao a considerable profit of over one-hundred thousand dollars. Tsao's case deals with the somewhat blurry line between criminal and civil suits, and thus should not be dwelt upon too extensively. His case represents criminal behavior, most definitely, but the suit filed against him by the SEC was not based on criminal charges, but rather, civil ones."

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