Insider trading as an aspect of white collar crime

Abstract

This discussion examines the criminal laws regarding insider trading of the United States, the United Kingdom and Australia. It points out that successful prosecutions in the United States have been aided by the provision of a civil penalty which has both a lower level of proof and potentially much higher financial penalties than exist under current Australian law. Several case studies on insider trading drawn from the United States are described to show how the criminal procedures developed there in the 1980s have resulted in several successful prosecutions. An argument is developed that these US procedures are effective because they address the nature of insider trading as a network of individuals motivated by self interest, where that self interest leads some individuals to cooperate with prosecutors in order to reduce their individual liability. Specific recommendations of proposed Australian legislation are then reviewed.