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Research Handbook on Insider Trading

Research Handbook on Insider Trading

Research Handbooks in Corporate Law and Governance series

Edited by Stephen M. Bainbridge

In most capital markets, insider trading is the most common violation of securities law. It is also the most well known, inspiring countless movie plots and attracting scholars with a broad range of backgrounds and interests, from pure legal doctrine to empirical analysis to complex economic theory. This volume brings together original cutting-edge research in these and other areas written by leading experts in insider trading law and economics.

Chapter 18: Insider trading regulation in Japan

J. Mark Ramseyer

Subjects: economics and finance, economic crime and corruption, law - academic, company and insolvency law, corporate law and governance, corruption and economic crime


Investors will always bring different amounts of information to the market. They will bring different analytical talents and different levels of sophistication. Precisely because men and women shrewder and wiser than us buy and sell in the market, we who are more naive can trade at prices that incorporate available information. When Congress passed the federal regulatory framework in the early 1930s, it provided that firms could recover insider profits from a narrow band of investors in a narrow set of trades. But further than that it did not go. Insider trading was not a crime. That state of affairs was one the Securities and Exchange Commission (SEC) and the courts would change. Through aggressive prosecution and compliant adjudication, insider trading in the USA has become a crime. Citing the general anti-fraud rule, the SEC and the courts now routinely send inside traders to prison. Occupied by the USA for seven years at mid-century, Japan inherited a securities law modeled on the two US statutes. As in the USA, firms could recover the profits earned by designated insiders in designated trades. Further the law did not go. Insider trading was not a crime.

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