Research Handbooks in Corporate Law and Governance series
Edited by Stephen M. Bainbridge
Chapter 22: Insider trading in European law
The history of European insider trading law starts as late as 1966 with an expert report for the European Commission, advocating a new legal framework for “The development of a European Capital Market.” Named after one of its authors, the “Segré Report” viewed insider trading as a “technical” problem, relating to directors or executives dealing in shares of their company. Only in 1989 did the European Council pass a directive in order to coordinate the widely differing insider trading regimes in the Member States. Fourteen years later, the European Parliament and the Council enacted a new directive addressing both insider trading and market manipulation as the two most prominent threats to smoothly working capital markets. In 2011, the European Commission published proposals for both a directive and a regulation to update and expand its legal regime on insider trading and market manipulation. US law has heavily influenced European insider trading law. This is particularly true with regard to legal concepts such as inside information, materiality and models of the reasonable investor’s behavior. Surprisingly, however, European law deviates quite markedly from US law as far as policy issues are concerned. It references concepts that have long been dismissed in US law, such as the integrity of capital markets, and the necessity to place investors on an equal footing and to protect them from what is perceived as an injury resulting from the improper use of inside information.
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