International Securities Markets: Insider Trading Law in China

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Kluwer Law International B.V., 2006 M01 1 - 356 páginas

This book offers the first detailed analysis of Chinaand s insider trading law, explaining what constitutes insider trading in China and what the consequences of unlawful insider trading might be there. More importantly, it suggests ways in which the law might more effectively prevent the occurrence of insider trading in the first place. Among the elements of the legal framework addressed by the author are the following:

and Who benefits from insider trading

and The issue of when information becomes public

and A comparative law treatment of the underlying theories of insider trading liability

and Private civil liability

and Damage caps

and Measures of recovery

The authorand s approach focuses on Chinaand s readiness to adopt foreign ideas without adequately assimilating them into the local context. In this connection, he sets out valuable reform proposals, using authority from field interviews with Chinese stakeholders as well as from comparative case law.

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Contenido

Introduction
1
Insider Trading in China Incidence and Regulations 2I An Overview of the Stock Market
7
Types of Shares
10
1 Ashares and Bshares
11
2 Tradable Shares and Nontradable Shares
13
3 Other Types of Shares
16
C The Regulatory Framework of the Market
17
Transitional Phase
18
2 Problems with the Misappropriation Theory
157
a Dubious Legal Reasoning
158
b Liability Loopholes
161
3 The Local Situation of China
163
b Ineffective Enforcement Framework
167
B Adoption of the Equality of Access Theory
169
1 Parity of Information vs Equality of Access
170
2 Common Law Principles
173

Centralized Regulatory Regime
19
Congressional Legislation
22
B Features of Chinas Insider Trading Law
23
2 Importation of Overseas Experience
25
C Problems with Chinas Insider Trading Law
26
2III Incidence of Insider Training
28
2 Criminal Insider Trading Cases
33
3 Summary
36
B The Extent of Insider Trading
37
2 Analysis of the Empirical Findings
40
b Insider Trading vs Other Types of Misconduct
44
C Features of Insider Trading Activities in China
46
2 Types of Insider Trading
47
3 Serious Offenses but Light Punishment
48
4 Likely Situations where Insider Trading Occurs
50
Market Misconduct
53
Why Insider Trading is Widespread A Costbenefit Analysis
57
3II Benefits
58
1 The Heavy Speculative Tint of the Market
59
the Importance of Insider Trading for Success in the Market
63
3 Insufficient Compensation for Corporate Insiders
66
B Other Benefits
68
2 Maintaining Good Interpersonal Relationships
69
Costs
71
b Problematic Corporate Governance
73
c The Porous Chinese WallProcedure
74
d Capricious Government Policies
77
e Interpersonal Relationships
78
B Low Risks of Apprehension
79
1 False Trading Names
80
2 Lack of Informers
81
3 Evidentiary Obstacles
83
4 The Ineffectiveness of the CSRC
84
C The Low Cost of Penalties
87
2 Low Levels of Damages to Reputation
89
3 Low Risk of Career Damage
91
3IV Conclusion
93
Effects of Insider Trading Harmful or Beneficial
95
4II Arguments as to the Effects of Insider Trading
96
2 Enhancing Market Efficiency and Smoothing Stock Price
100
B The Harmful Effects of Insider Trading
102
1 Harm to the Market Generally
103
2 Harm to Listed Corporations
105
3 Harm to Investors
106
C Summary
107
4III Emperical Findings on the Effects of Insider Trading
111
A The Beneficial Effects of Insider Trading
113
B The Harmful Effects of Insider Trading
116
C Analysis of the Findings
118
2 Detrimental Effects
119
3 Summary
121
4IV Conclusion
122
Theories of Insider Trading Liability A Comparative Analysis
125
the US experience
130
A The Statutory Basis
131
B The Equality of Access Theory
134
2 SEC v Texas Gulf Sulphur Co
135
the Classical Theory and the Misappropriation Theory
136
a Rule 14e3
141
a Regulation FD
144
3 United States v OHagan
146
b Adoption of the Misappropriation Theory in OHagan
148
The Equality of Acess Theory vs Fidaciarydutybased Theories
151
1 Problems with the Classical Theory
152
b Problems arising from the Personal BenefitTest for Tipping Liability
155
3 The Widespread Acceptance of the Equality of Access Theory
177
a Blossoming Overseas
178
b Revival in the US
179
the Equality of Access Theory is More Appropriate
181
5V Conclusion
183
Some Basic Elements of Insider Trading
185
A The Overall Framework
186
B The shortswing Trading Prohibition
192
6III Insiders
194
THE Australian Information Connection only Approach
197
2 Concerns with the Australian Approach
199
6IV Inside Information
203
B Materiality
206
2 Precision of Inside Information
210
C When Information Becomes Public
212
the Australian Debate
215
6V Subjective Elements
219
B Awareness of Inside Information
221
2 Possession of Inside Information
223
3 Knowledge that the Information is Inside Information
227
THE US Possesion vs Use Debate
231
2 Various Approaches to the Debate
232
b The Strict Use Standard
234
d The Modified Possession Standard
236
3 The Unsuitability of the Strict Possession and Strict Use Standard
238
b Arguments against the Strict Use Standard
239
the Modified Possession Standard is Preferable to the Modified Use Standard
243
b Problems with the Defences under the Modified Use Standard
245
D Conclusion
249
6VI Securities Covered
250
Private Civil Liability for Insider Trading
253
7II The Private Enforcement of Insider Trading in China
254
7III Different Measures of Damages in Securities Fraud Actions
256
2 The Modified OutofPocket Measure
258
3 The BenefitoftheBargain Measure
260
4 Consequential Damages
261
5 The Cover Measure
262
6 Rescission Restitution or Rescissory Damages
263
7 The WindfallProfits Measure
265
B Analysis of the Measurement of Recovery
269
1 Shifting of Posttransaction Market Risks
270
2 The Application of Measures of Recovery and the Open Market Problem
272
7IV Eligible Plaintiffs
274
a Fridrich v Bradford
275
b The Concurring Opinion of Judge Celebrezze
276
2 The Contemporaneous Traders Approach
277
b Codification of the Contemporaneous Trader Approach
280
3 The NondisclosurePeriod Traders Approach
282
b The ALI Federal Securities Code
284
4 Summary
286
Individual Investors Harmed by Insider Trading
288
Victimless Fraud?
289
2 Victims of Insider Trading
290
Eligibility to Being Forward a Private Action
295
2 Problems with the Contemporaneous Traders Approach
298
3 The Suitability of the Nondisclosureperiod Traders Approach
300
7V Conclusion
304
Chapter 8
307
Appendix 1
311
Appendix 2
317
Bibliography
321
Table of Cases
341
Index
347
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